AGREEMENT AND PLAN OF MERGER BY AND AMONG APEX BIOVENTURES ACQUISITION CORPORATION APEX ACQUISITION SUB, INC., DYNOGEN PHARMACEUTICALS, INC., AND KATE BINGHAM AND MICHAEL BIGHAM, ACTING JOINTLY AS THE HOLDER REPRESENTATIVES Dated as of February 5, 2008
AGREEMENT
AND PLAN OF MERGER
BY
AND
AMONG
APEX
ACQUISITION SUB, INC.,
DYNOGEN
PHARMACEUTICALS, INC., AND
XXXX
XXXXXXX AND XXXXXXX XXXXXX, ACTING JOINTLY
AS
THE
HOLDER REPRESENTATIVES
Dated
as
of February 5, 2008
TABLE
OF
CONTENTS
Page
|
ARTICLE
I
|
THE
MERGER
|
2
|
|
|
1.1.
|
The
Merger
|
2
|
|
|
1.2.
|
Effective
Time
|
2
|
|
|
1.3.
|
Effect
of the Merger
|
2
|
|
|
1.4.
|
Certificate
of Incorporation and By-Laws of the Surviving Corporation
|
2
|
|
|
1.5.
|
Directors
and Officers
|
2
|
|
|
1.6.
|
Conversion
of Capital Stock
|
3
|
|
|
1.7.
|
Treatment
of Company Options.
|
4
|
|
|
1.8.
|
Treatment
of Company Warrants.
|
5
|
|
|
1.9.
|
Treatment
of Secured Warrants
|
6
|
|
|
1.10.
|
Treatment
of Bridge Notes.
|
6
|
|
|
1.11.
|
Success
Fees.
|
7
|
|
|
1.12.
|
Closing
|
8
|
|
|
1.13.
|
Dissenting
Shares
|
8
|
|
|
1.14.
|
Taking
of Necessary Action; Further Action
|
9
|
|
|
1.15.
|
Tax
Consequences
|
9
|
|
|
ARTICLE
II
|
CLOSING
PAYMENTS; PAYMENTS OF MERGER CONSIDERATION
|
9
|
|
|
2.1.
|
Closing
Payments
|
9
|
|
|
2.2.
|
Exchange
of Certificates.
|
10
|
|
|
ARTICLE
III
|
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
|
12
|
|
|
3.1.
|
Organization,
Good Standing and Qualification of the Company
|
12
|
|
|
3.2.
|
No
Subsidiaries
|
12
|
|
|
3.3.
|
Authorization;
Binding Obligations.
|
12
|
|
|
3.4.
|
Capitalization.
|
13
|
|
|
3.5.
|
Consents
and Approvals
|
15
|
|
|
3.6.
|
No
Violation
|
15
|
|
|
3.7.
|
Corporate
Books
|
15
|
|
|
3.8.
|
Licenses
and Permits
|
16
|
|
|
3.9.
|
Required
Vote.
|
16
|
|
|
3.10.
|
Title
to Properties and Assets.
|
17
|
|
|
3.11.
|
Real
Property.
|
17
|
|
|
3.12.
|
Environmental
Matters.
|
17
|
|
|
3.13.
|
Financial
Statements; Undisclosed Liabilities.
|
18
|
|
|
3.14.
|
Absence
of Certain Events
|
19
|
|
|
3.15.
|
Legal
Proceedings; Orders
|
20
|
|
|
3.16.
|
Compliance
with Laws
|
21
|
|
|
3.17.
|
Employment
and Labor Matters.
|
21
|
|
|
3.18.
|
Employee
Benefit Plans.
|
23
|
|
|
3.19.
|
Taxes.
|
27
|
|
|
3.20.
|
Contracts.
|
29
|
|
|
3.21.
|
Transactions
With Related Parties.
|
31
|
|
i
|
3.22.
|
Insurance
|
31
|
|
|
3.23.
|
Certain
Business Practices
|
31
|
|
|
3.24.
|
Intellectual
Property; Patents.
|
31
|
|
|
3.25.
|
No
Brokers
|
34
|
|
|
3.26.
|
Computer
Systems
|
34
|
|
|
3.27.
|
Registration
Statement; Proxy Statement/Prospectus
|
35
|
|
|
3.28.
|
FDA
and Related Matters.
|
35
|
|
|
3.29.
|
Relationships
with Customers, Suppliers and Research Collaborators
|
36
|
|
|
3.30.
|
Powers
of Attorney
|
37
|
|
|
3.31.
|
Representations
and Warranties Complete
|
37
|
|
|
ARTICLE
IV
|
REPRESENTATIONS
AND WARRANTIES OF PARENT AND ACQUISITION SUB
|
37
|
|
|
4.1.
|
Organization,
Good Standing and Qualification.
|
37
|
|
|
4.2.
|
Subsidiaries
|
38
|
|
|
4.3.
|
Authorization;
Binding Obligations.
|
38
|
|
|
4.4.
|
Capitalization.
|
39
|
|
|
4.5.
|
Consents
and Approvals
|
40
|
|
|
4.6.
|
No
Violation
|
40
|
|
|
4.7.
|
Required
Vote.
|
41
|
|
|
4.8.
|
Title
to Properties and Assets
|
41
|
|
|
4.9.
|
SEC
Documents.
|
41
|
|
|
4.10.
|
Financial
Statements; Undisclosed Liabilities.
|
42
|
|
|
4.11.
|
Absence
of Certain Events
|
42
|
|
|
4.12.
|
Restrictions
on Business Activities
|
43
|
|
|
4.13.
|
Legal
Proceedings; Orders
|
43
|
|
|
4.14.
|
Compliance
with Laws
|
43
|
|
|
4.15.
|
Employment
and Labor Matters; Employee Benefit Plans
|
43
|
|
|
4.16.
|
Contracts.
|
43
|
|
|
4.17.
|
Transactions
With Related Parties
|
44
|
|
|
4.18.
|
Indebtedness
|
45
|
|
|
4.19.
|
Insurance
|
45
|
|
|
4.20.
|
AMEX
|
45
|
|
|
4.21.
|
Trust
Account
|
45
|
|
|
4.22.
|
Ownership
of Company Stock
|
45
|
|
|
4.23.
|
No
Brokers
|
45
|
|
|
4.24.
|
Representations
and Warranties Complete
|
45
|
|
|
ARTICLE
V
|
COVENANTS
|
46
|
|
|
5.1.
|
Conduct
Pending Closing.
|
46
|
|
|
5.2.
|
Registration
Statement; Proxy Statement; Other Filings; etc.
|
49
|
|
|
5.3.
|
HSR
Act Filings; Other Approvals, Filings and Consents.
|
52
|
|
|
5.4.
|
Access
to Information
|
53
|
|
|
5.5.
|
Notice
of Certain Events
|
54
|
|
|
5.6.
|
Public
Announcements; Xxx-Xxxxxxxxxx
|
00
|
|
|
5.7.
|
Directors
and Officers of Parent and the Company After Merger
|
54
|
|
|
5.8.
|
Charter
Protections; Directors’ and Officers’ Liability Insurance.
|
54
|
|
ii
|
5.9.
|
Treatment
as a Reorganization
|
55
|
|
|
5.10.
|
No
Securities Transactions
|
55
|
|
|
5.11.
|
No
Claim Against Trust Account
|
55
|
|
|
5.12.
|
Updates
to Disclosure Schedule for Post-Signing Events
|
55
|
|
|
5.13.
|
No
Solicitation
|
56
|
|
|
5.14.
|
Cooperation;
Further Assurances.
|
56
|
|
|
5.15.
|
Company
Affiliates
|
57
|
|
|
5.16.
|
Registration
Rights Agreement
|
57
|
|
|
ARTICLE
VI
|
CONDITIONS
PRECEDENT TO MERGER
|
57
|
|
|
6.1.
|
Conditions
to Obligation of Each Party to Effect the Merger
|
57
|
|
|
6.2.
|
Additional
Conditions to Obligations of Parent and Acquisition Sub
|
58
|
|
|
6.3.
|
Additional
Conditions to Obligations of the Company
|
60
|
|
|
ARTICLE
VII
|
TERMINATION,
AMENDMENT, WAIVER AND EXPENSES
|
62
|
|
|
7.1.
|
Termination
|
62
|
|
|
7.2.
|
Effect
of Termination
|
63
|
|
|
7.3.
|
Expenses.
|
63
|
|
|
ARTICLE
VIII
|
ESCROW;
REPRESENTATIVE
|
63
|
|
|
8.1.
|
Escrow.
|
63
|
|
|
8.2.
|
Holder
Representatives.
|
64
|
|
|
ARTICLE
IX
|
INDEMNIFICATION
|
66
|
|
|
9.1.
|
Indemnification
of Parent.
|
66
|
|
|
9.2.
|
Indemnification
of Third Party Claims
|
66
|
|
|
9.3.
|
Indemnification
not Involving a Third Party Claim
|
68
|
|
|
9.4.
|
Insurance
|
68
|
|
|
9.5.
|
Limitations
on Indemnification.
|
69
|
|
|
9.6.
|
Exclusive
Remedy
|
69
|
|
|
9.7.
|
Adjustment
to Transaction Consideration
|
70
|
|
|
ARTICLE
X
|
MISCELLANEOUS
|
70
|
|
|
10.1.
|
Entire
Agreement; Amendments
|
70
|
|
|
10.2.
|
Assignment
|
70
|
|
|
10.3.
|
Counterparts
|
70
|
|
|
10.4.
|
Governing
Law; Venue; Waiver of Jury Trial
|
70
|
|
|
10.5.
|
Specific
Performance
|
71
|
|
|
10.6.
|
Interpretation
|
71
|
|
|
10.7.
|
Severability
|
71
|
|
|
10.8.
|
Notices
|
72
|
|
|
10.9.
|
Representation
by Counsel
|
73
|
|
|
10.10.
|
Construction
|
73
|
|
|
10.11.
|
Waivers
|
73
|
|
|
10.12.
|
Disclaimer
of Additional Representations and Warranties
|
73
|
|
|
10.13.
|
No
Third Party Beneficiaries
|
74
|
|
iii
AGREEMENT
AND PLAN OF MERGER
AGREEMENT
AND PLAN OF MERGER (the “Agreement”),
dated
as of February 5, 2008, by and among APEX BIOVENTURES ACQUISITION CORPORATION,
a
Delaware corporation (“Parent”),
APEX
ACQUISITION SUB, INC., a Delaware corporation and wholly-owned subsidiary
of
Parent (“Acquisition
Sub”),
DYNOGEN PHARMACEUTICALS, INC., a Delaware corporation (the “Company”),
and
the Holder Representatives (as defined below), as representative on behalf
of
the Company Holders (as defined below).
WHEREAS,
Parent has received a written opinion (a “Fairness
Opinion”)
of a
reputable financial advisory or investment banking firm in the business of
rendering such opinions to the effect that the fair market value of the Company
equals or exceeds 80% of Parent’s net assets as of the date of this Agreement
(excluding deferred underwriting discounts and commissions of approximately
$2,070,000);
WHEREAS,
in furtherance of such acquisition, the Boards of Directors of Parent,
Acquisition Sub and the Company have each approved and declared advisable
this
Agreement and the merger (the “Merger”)
of
Acquisition Sub with and into the Company, in accordance with the General
Corporation Law of the State of Delaware (the “DGCL”),
upon
the terms, and subject to the conditions, set forth herein, which Merger
will
result in, among other things, the Company becoming a wholly-owned subsidiary
of
Parent;
WHEREAS,
concurrently with the execution of this Agreement, and as a condition and
inducement to Parent’s willingness to enter into this Agreement, the
stockholders of the Company identified on Schedule
I
hereto
(the “Principal
Stockholders”)
are
entering into a voting agreement with Parent in form and substance mutually
agreeable to Parent and the Principal Stockholders (the “Voting
Agreement”);
WHEREAS,
concurrently with the execution of this Agreement, and as a condition and
inducement to Parent’s willingness to enter into this Agreement, the Company’s
Key Employees (as defined below) have executed and delivered to Parent
agreements (the “Key
Employee Letter Agreements”)
pursuant to which each of them agree, among other things, not to offer, sell,
pledge, transfer or otherwise dispose of shares of Parent Common Stock or
other
securities of Parent from and after the date of this Agreement through the
180th
day
following the Closing Date; and
WHEREAS,
defined terms used in this Agreement are set forth in the Schedule of Defined
Terms attached hereto as Schedule
II,
in each
case, together with the applicable definition or reference to the Section
of
this Agreement in which the definition may be located;
ARTICLE
I
1.1. The
Merger.
Upon
the terms, and subject to the conditions, set forth in this Agreement, and
in
accordance with the DGCL, Acquisition Sub shall be merged with and into the
Company at the Effective Time. From and after the Effective Time, the separate
corporate existence of Acquisition Sub shall cease and the Company, as the
surviving corporation in the Merger, shall continue its existence under the
laws
of the State of Delaware as a wholly-owned subsidiary of Parent. The Company,
as
the surviving corporation after the Merger, is sometimes referred to as the
“Surviving
Corporation.”
1.2. Effective
Time.
On the
Closing Date, subject to the terms and conditions set forth in this Agreement,
the parties shall cause the Merger to be consummated by filing with the
Secretary of State of the State of Delaware a certificate of merger (the
“Certificate
of Merger”)
in
form and substance mutually agreeable to Parent and the Company and executed
in
accordance with the relevant provisions of the DGCL (the date and time of
such
filing, or such later date and time as may be specified in the Certificate
of
Merger by mutual agreement of Parent and the Company, being the “Effective
Time”).
1.3. Effect
of the Merger.
At the
Effective Time, the effect of the Merger shall be as provided in this Agreement
and in the applicable provisions of the DGCL. Without limiting the generality
of
the foregoing, and subject thereto, at the Effective Time, all of the assets,
properties, rights, privileges, immunities, powers and franchises of the
Company
and Acquisition Sub shall vest in the Surviving Corporation, and all debts,
liabilities and duties of the Company and Acquisition Sub shall become the
debts, liabilities and duties of the Surviving Corporation.
1.4. Certificate
of Incorporation and By-Laws of the Surviving Corporation.
At the
Effective Time and without further action on the part of the parties hereto,
(a)
the Certificate of Incorporation of Acquisition Sub shall be amended in form
and
substance mutually agreeable to the Company and Parent and shall be the
Certificate of Incorporation of the Surviving Corporation and (b) the By-Laws
of
Acquisition Sub shall be the By-Laws of the Surviving Corporation, in each
case,
until thereafter amended as provided by the DGCL.
1.5. Directors
and Officers.
Following the date of this Agreement and prior to the Mailing Date, Parent
and
the Company shall coordinate in good faith to determine the individuals to
serve
as the initial officers of the Surviving Corporation (the “Initial
Officers”)
and
the initial directors of the Surviving Corporation (the “Initial
Directors”
and,
together with the Initial Officers, the “Initial
Officers and Directors”),
each
of whom shall hold office in accordance with the Certificate of Incorporation
and the By-Laws of the Surviving Corporation until their respective successors
are duly elected or appointed and qualified or until their earlier death,
or
their resignation or removal in accordance with the Surviving Corporation’s
Certificate of Incorporation and By-Laws or the terms of any contract pursuant
to which they may be serving as such.
2
1.6. Conversion
of Capital Stock.
At the
Effective Time, by virtue of the Merger and without any action on the part
of
Parent, Acquisition Sub or the Company or their respective
stockholders:
(a) Acquisition
Sub Capital Stock.
Each
share of common stock, par value $0.0001 per share, of Acquisition Sub issued
and outstanding immediately prior to the Effective Time shall be converted
into
one validly issued, fully paid and non-assessable share of common stock,
par
value $0.00001 per share, of the Surviving Corporation;
(b) Treasury
Shares.
Each
share of capital stock of the Company held in the treasury of the Company
(the
“Treasury
Shares”)
shall
be cancelled and retired, and no payment shall be made in respect thereof;
(c) Excluded
Shares.
Each
share of capital stock of the Company held by Parent or Acquisition Sub or
any
of their respective Affiliates (the “Excluded
Shares”)
shall
be cancelled and retired, and no payment shall be made in respect thereof;
(d) Conversion
of Company Common Stock.
Each
share of common stock, par value $0.00001 per share, of the Company (the
“Company
Common Stock”),
issued and outstanding immediately prior to the Effective Time, but excluding
Dissenting Shares, Treasury Shares and the Excluded Shares, shall be converted
into the right to receive, subject to the terms and conditions of this Agreement
and the Escrow & Exchange Agreement, such number of shares of Parent Common
Stock, as shall equal the quotient obtained by dividing (i) the quotient
of (A)
the sum of $97,000,000,
plus an
amount
equal to the Aggregate Exercise Price, divided
by
(B) the
Parent Signing Price, by
(ii) a
number equal to the Fully-Diluted Share Number (the resulting number being
the
“Conversion
Ratio”
and
the
resulting number of shares of Parent Common Stock (or fraction thereof) being
the “Per
Share Merger Consideration”);
(e) Conversion
of Company Preferred Stock.
Each
share of preferred stock, par value $0.00001 per share, of the Company (the
“Company
Preferred Stock”
and,
together with the Company Common Stock, the “Company
Stock”),
issued and outstanding immediately prior to the Effective Time, but excluding
Dissenting Shares, Treasury Shares and the Excluded Shares, shall be converted
into the right to receive, subject to the terms and conditions of this Agreement
and the Escrow & Exchange Agreement, the Per Share Merger Consideration with
respect to each share of Company Common Stock issuable immediately prior
to the
Effective Time upon conversion of such share of Company Preferred Stock;
and
(f) Cancellation
of Company Stock.
Each
share of Company Stock issued and outstanding immediately prior to the Effective
Time, but excluding the Dissenting Shares, Treasury Shares and the Excluded
Shares, shall no longer be outstanding and shall automatically be cancelled
and
shall cease to exist, and, subject to Section 1.13 below, each holder of
such
Company Stock (a “Stockholder”)
shall
cease to have any rights with respect thereto, except the right to receive
the
payment contemplated by Section 1.6(d) or (e) and Section 1.11 above in
accordance with the provisions of Section 2.2 below.
3
(a) Following
the date of this Agreement and prior to the Closing Date, the Company shall,
in
compliance with any notice requirements under the Company’s Option Plan and the
applicable Option Agreement, notify each holder (each, an “Optionholder”)
of a
Company Option of the proposed Merger and the effect of the Merger on the
Company Options. Upon the exercise of any Company Option on or prior to the
Business Day immediately preceding the Closing Date, the holder thereof (i)
will
receive from the Company a certificate, registered in such holder’s name,
evidencing the number of shares of Company Common Stock to which such holder
is
entitled, and (ii) following such exercise shall be treated as a Stockholder.
For purposes of this Agreement, the term “Option
Agreement”
means
collectively, all documents evidencing a Company Option.
(b) At
the
Effective Time, by virtue of the Merger, and without further action on the
part
of Parent, Acquisition Sub or the Company or their respective stockholders,
each
unexercised Company Option (whether or not exercisable, vested or unvested)
shall be assumed by Parent and shall become an option under the Parent Plan
(a
“Parent
Option”)
to
acquire such whole number of shares of Parent Common Stock as shall equal
(i)
the number of Option Shares subject to such Company Option, multiplied
by
(ii) the
Conversion Ratio (rounding the resulting number down to the nearest whole
number), at a per share exercise price equal to (A) the per share exercise
price
at which such Company Option was exercisable immediately prior to the Effective
Time, multiplied
by (B)
the
quotient of (x) one, divided
by
(y) the
Conversion Ratio (rounding the resulting number up to the nearest whole cent).
Each Parent Option will be evidenced by an option agreement, in form and
substance reasonably satisfactory to Parent and the Company, which shall
include, among other things, terms and conditions substantially similar to
those
applicable under the Company’s Option Plan immediately prior to the Effective
Time (including, without limitation, any repurchase rights, vesting provisions
and provisions regarding acceleration of vesting upon certain transactions).
After such assumption and conversion, each Company Option shall be deemed
terminated and of no further force or effect.
4
(a) Following
the date of this Agreement and prior to the Closing Date, the Company shall,
in
compliance with any notice requirements under the applicable Warrant Agreement,
notify each holder (each, a “Warrantholder”)
of a
Company Warrant of the proposed Merger. A Warrantholder who elects to exercise
his, her or its Company Warrant prior to the Effective Time (i) will receive
from the Company a Certificate, registered in such Warrantholders’s name,
evidencing the number of shares of Company Common Stock or Company Preferred
Stock to which such Warrantholder is entitled, and (ii) following such exercise
shall be treated as a Stockholder. For purposes of this Agreement, the term
“Warrant
Agreement”
means,
collectively, all documents evidencing a Warrant.
(b) At
the
Effective Time, by virtue of the Merger, and without further action on the
part
of Parent, Acquisition Sub or the Company or their respective stockholders,
each
unexercised Company Warrant (whether or not exercisable, vested or unvested)
shall be assumed by Parent and shall become a warrant (a “Parent
Warrant”)
to
acquire such whole number of shares of Parent Common Stock as shall equal
(i)
the number of Warrant Shares subject to such Company Warrant, multiplied
by
(ii) the
Conversion Ratio (rounding the resulting number down to the nearest whole
number), at a per share exercise price equal to (A) the per share exercise
price
at which such Company Warrant was exercisable immediately prior to the Effective
Time, multiplied
by (B)
the
quotient of (x) one,
divided by
(y) the
Conversion Ratio (rounding the resulting number up to the nearest whole cent).
Each Parent Warrant will be evidenced by a warrant agreement, in form and
substance reasonably satisfactory to Parent and the Company, which shall
include, among other things, terms and conditions substantially similar to
those
applicable to the Company Warrants under the applicable Warrant Agreements
immediately prior to the Effective Time (including, without limitation, any
repurchase rights, vesting provisions and provisions regarding acceleration
of
vesting upon certain transactions). After such assumption and conversion,
each
Company Warrant shall be deemed terminated and of no further force or effect.
1.9. Treatment
of Secured Warrants.
At the
Effective Time, by virtue of the Merger, and without further action on the
part
of Parent, Acquisition Sub or the Company or their respective stockholders,
each
unexercised Secured Warrant (whether or not exercisable, vested or unvested)
shall be assumed by Parent and shall become a warrant (a “Parent
Secured Warrant”)
to
acquire such whole number of shares of Parent Common Stock as provided for
therein. Each Parent Secured Warrant will be evidenced by a warrant agreement,
in form and substance reasonably satisfactory to Parent and the Company,
which
shall include, among other things, terms and conditions substantially similar
to
those applicable to the Secured Warrants immediately prior to the Effective
Time
(including, without limitation, any repurchase rights, vesting provisions
and
provisions regarding acceleration of vesting upon certain transactions) and
restrictions with respect to the offer, sale, transfer or other disposition
of
the shares of Parent Common Stock issuable upon exercise thereof through
the
180th
day
following the Closing Date. After such assumption and conversion, each Secured
Warrant shall be deemed terminated and of no further force or
effect.
5
1.10. Treatment
of Bridge Notes.
(a) At
the
Effective Time, by virtue of the Merger, and without further action on the
part
of Parent, Acquisition Sub or the Company or their respective stockholders,
each
Bridge Note issued and outstanding immediately prior to the Effective
Time:
(i) shall
be
converted into the right to receive, subject to the terms and conditions
of this
Agreement and the Escrow & Exchange Agreement, (A) such number of shares of
Parent Common Stock as shall equal (x) the principal amount of such Bridge
Note,
divided
by
(y) the
Parent Signing Price (rounding the resulting number down to the nearest whole
number), and (B) a warrant (a “Parent
Bridge Warrant”)
to
purchase such number of shares of Parent Common Stock as shall equal (x)
the
principal amount of such Bridge Note, multiplied
by
(y)
0.25, divided
by,
(z) the
Parent Signing Price (rounding the resulting number down to the nearest whole
number), at a per share exercise price equal to the Parent Signing Price,
subject to redemption at a per share price of $0.01 if the volume weighted
average price of Parent Common Stock equals or exceeds $11.50 per share for
any
20 trading days within any 30 trading day period, and
(ii) shall
no
longer be outstanding and shall automatically be cancelled and shall cease
to
exist, and each holder of such Bridge Note (a “Bridge
Investor”)
shall
cease to have any rights with respect thereto, except the right to receive
the
payment contemplated by this Section 1.10, in accordance with the provisions
of
Section 2.2 below.
(b) Each
Parent Bridge Warrant will be evidenced by a warrant agreement, in form and
substance reasonably satisfactory to Parent and the Company, which shall
include, among other things, (i) restrictions with respect to the offer,
sale,
transfer or other disposition of the shares of Parent Common Stock issuable
upon
exercise thereof through the 180th
day
following the Closing Date, and (ii) rights relating to the registration
of the
shares of Parent Common Stock issuable upon exercise of the Parent Bridge
Warrants.
6
1.11. Success
Fees.
(a) Upon
the
first dosing of a U.S. Phase III trial patient in a first indication, following
an “End of Phase II Meeting” with the FDA as reflected in FDA minutes which
enables the Surviving Corporation to initiate a Phase III trial, provided,
that
such closing occurs within the first five years immediately following the
Closing Date, each Success Fee Recipient shall become entitled to receive,
his,
her or its Proportionate Share of the First Success Fee Shares.
(b) Upon
the
first dosing of a U.S. Phase III trial patient in a second indication, following
an “End of Phase II Meeting” with the FDA as reflected in FDA minutes which
enables the Surviving Corporation to initiate a Phase III trial, provided,
that
such closing occurs within the first five years immediately following the
Closing Date, each Success Fee Recipient shall become entitled to receive,
his,
her or its Proportionate Share of the Second Success Fee Shares.
(c) Upon
the
occurrence of a Qualified Fundamental Transaction, if not already paid pursuant
to the foregoing provisions of this Section 1.11, each Success Fee Recipient
shall become entitled to receive his, her or its Proportionate Share of the
First Success Fee Shares and/or the Second Success Fee Shares.
(d) For
purposes hereof, the following terms have the following meanings:
“Fundamental
Transaction”
means
(i) any merger, consolidation, reorganization or other similar transaction
of
Parent or the Surviving Corporation into or with any other corporation or
entity
(other than with and into a corporation or other entity, 100% of the outstanding
capital stock or other equity interests of which are held, directly or
indirectly, by Parent), as a result of which the holders of the outstanding
voting securities of the Parent or the Surviving Corporation, as applicable,
immediately prior to such transaction hold less than 50% of the voting power
of
the voting securities of the surviving entity immediately following such
transaction, (ii) sale of all of the capital stock of the Surviving Corporation
to a Person that is not an Affiliate of Parent, or (iii) a sale, conveyance,
mortgage, transfer, license, pledge, lease or other disposition of all or
substantially all of the assets of Parent or the Surviving Corporation to
a
Person that is not an Affiliate of Parent.
“First
Success Fee Shares”
and
“Second
Success Fee Shares”
each
mean such number of shares of Parent Common Stock as shall equal (i)
$23,000,000,
divided by
(ii) the
Parent Signing Price.
“Forfeiting
Optionholder”
means
an Optionholder whose employment with the Surviving Corporation is terminated
(by the Surviving Corporation or by such Optionholder, for any reason or
no
reason) prior to the time of determination for the payment of the First Success
Fee Shares or the Second Success Fee Shares, as applicable, unless such
Optionholder exercises his or her right to purchase shares of Parent Common
Stock pursuant to a Parent Option.
7
“Proportionate
Share”
means,
with respect to any particular Success Fee Recipient, (i) the number of shares
of Parent Common Stock to which such Success Fee Recipient is entitled pursuant
to Sections 1.6(d) and (e), plus the number of shares of Parent Common Stock
issuable upon exercise of Parent Options to which such Success Fee Recipient
is
entitled pursuant to Section 1.7(b), but only to the extent such Parent Options
are vested and exercisable immediately following the Closing Date by the
terms
thereof (and without giving effect to the provisions of the Key Employee
Letter
Agreements), relative to (ii) the aggregate number of shares of Parent Common
Stock to which all Success Fee Recipients are entitled pursuant to Sections
1.6(d) and (e), plus the aggregate number of shares of Parent Common Stock
issuable upon exercise of all Parent Options to which all Success Fee Recipients
are entitled pursuant to Section 1.7(b), but only to the extent such Parent
Options are vested and exercisable immediately following the Closing Date
by the
terms thereof (and without giving effect to the provisions of the Key Employee
Letter Agreements).
“Qualified
Fundamental Transaction”
means
a
Fundamental Transaction which occurs during the first five years immediately
following the Closing Date if the proceeds of such Fundamental Transaction
result in a cash payment or other consideration to the holders of shares
of
Parent Common Stock in an amount equal to or greater than the Parent Signing
Price (as appropriately adjusted for any stock split, combination,
capitalization or other similar transaction occurring after the Closing Date
and
prior to such Fundamental Transaction). (If and to the extent non-cash
consideration is paid in connection with the Fundamental Transaction, the
value
thereof for purposes of this definition will be determined in good faith
by
Parent’s Board of Directors.)
“Success
Fee Recipient”
means
each Stockholder and each Optionholder (other than a Forfeiting
Optionholder).
1.12. Closing.
Subject
to the terms and conditions hereof, the closing of the Merger and the
transactions contemplated by this Agreement (the “Closing”)
will
take place at 10:00 a.m., local time, no later than the third Business Day
following the date on which the last of the conditions set forth in Article
VI
have been satisfied or waived (other than any such conditions that by their
terms cannot be satisfied until the Closing Date, which conditions shall
be
required to be so satisfied or waived on the Closing Date) and, in any event,
subject to extension as set forth in Section 7.1(b), no later than the Outside
Date, unless another time or date is agreed to in writing by the Company
and
Parent (the date upon which the Closing occurs being the “Closing
Date”).
The
Closing shall be held at the offices of Mintz, Levin, Cohn, Ferris, Glovsky
and
Popeo, P.C., Chrysler Center, 666 Third Avenue, New York, New York, or remotely
via the exchange of executed documents and other closing
deliverables.
1.13. Dissenting
Shares.
Shares
of Company Stock that are held by a Stockholder who (a) has not voted such
shares in favor of the Merger or delivered a written consent in lieu of such
vote, (b) shall have delivered a timely written demand for appraisal of such
shares in the manner provided for in Section 262 of the DGCL, and (c) shall
not
have effectively withdrawn or lost such right to appraisal as of the Effective
Time (such shares, the “Dissenting
Shares”),
shall
be entitled to such rights (but only such rights) as are granted by Section
262
of the DGCL. Each holder of Dissenting Shares who becomes entitled to payment
for such Dissenting Shares pursuant to Section 262 of the DGCL shall, subject
to
the terms of this Agreement, receive payment therefor from the Surviving
Corporation in accordance with the DGCL; provided, however, that (i) if any
such
holder of Dissenting Shares shall have failed to establish such holder’s
entitlement to appraisal rights as provided in Section 262 of the DGCL, (ii)
if
any holder of Dissenting Shares shall have effectively withdrawn its demand
for
appraisal of such Dissenting Shares or lost its right to appraisal and payment
for its Dissenting Shares under Section 262 of the DGCL, or (iii) if no holder
of Dissenting Shares has filed a petition demanding a determination of the
value
of all Dissenting Shares within the time provided for the filing of such
petition in Section 262 of the DGCL, then (A) such holder shall forfeit the
right to appraisal of such Dissenting Shares and cease to be deemed a holder
of
Dissenting Shares, and (B) each such Dissenting Share shall be deemed to
have
been converted into, as of the Effective Time, the right to receive the Per
Share Merger Consideration, less
any
required tax withholding, without any interest thereon, upon surrender, in
the
manner provided in Article II below, of the Certificate that formerly evidenced
such share or, in the event that such Certificate is lost, stolen, mutilated
or
destroyed, a properly completed and executed Affidavit of Loss. The Company
shall give Parent (x) prompt written notice of any demands for appraisal
received by the Company, withdrawals of such demands, and any other instruments
served pursuant to the DGCL and received by the Company, and (y) the opportunity
to lead all negotiations and proceedings with respect to demands for appraisal
under the DGCL (it being understood that the Company shall be entitled to
participate therein). The Company shall not make any payment with respect
to, or
settle or offer to settle, any such demand, except with the prior written
consent of Parent or as may otherwise be required by applicable
Law.
8
1.14. Taking
of Necessary Action; Further Action.
If, at
any time after the Effective Time, any further action is necessary or desirable
to carry out the purposes of this Agreement and to vest the Surviving
Corporation with full right, title and possession to all assets, property,
rights, privileges, powers and franchises of the Company and Acquisition
Sub,
the officers and directors of the Surviving Corporation are fully authorized,
in
the name of the Company and Acquisition Sub respectively, to take all such
lawful and necessary action.
1.15. Tax
Consequences.
It is
intended by the parties hereto that the Merger constitute a reorganization
within the meaning of Section 368 of the Code. The parties hereto adopt this
Agreement as a “plan of reorganization” within the meaning of Sections
1.368-2(g) and 1.368-3(a) of the United States Income Tax
Regulations.
ARTICLE
II
2.1. Closing
Payments.
On or
prior to the Closing Date, each of Parent and the Company will pay (or cause
to
be paid) their respective Transaction Expenses, which, if paid at Closing,
may
be paid using funds from the Parent’s Trust Account.
9
2.2. Exchange
of Certificates.
(a) Agent.
Effective as of the Closing Date, Parent, the Company and the Surviving
Corporation will appoint Continental Stock Transfer & Trust Company
(“Agent”)
to act
as escrow agent for the escrow of the Indemnity Shares and exchange agent
for
the payment of the Merger Consideration.
(b) Letter
of Transmittal.
As soon
as reasonably practicable after the Effective Time (but in any event within
five
Business Days after the Effective Time), Parent and the Surviving Corporation
will cause the Agent to send to each Stockholder, Optionholder, Warrantholder,
Secured Lender and Bridge Investor (each, a “Company
Holder”),
a
letter of transmittal (the “Letter
of Transmittal”),
which
shall, among other things, provide instructions for effecting the surrender
of
stock certificates representing Company Stock, Option Agreements, Warrant
Agreements, warrant agreements representing Secured Warrants or promissory
notes
representing Bridge Notes (in any case, “Certificates”)
(or an
affidavit of loss in form and substance acceptable to Parent (an “Affidavit
of Loss”)
in
lieu of any lost, stolen, mutilated or destroyed Certificate) in exchange
for
Merger Consideration.
(c) Surrender
of Certificates; Payment of Merger Consideration.
Following surrender to the Agent of a Certificate (or, in lieu thereof, an
executed and completed Affidavit of Loss), together with a duly executed
and
completed Letter of Transmittal and such other documents as may reasonably
be
required by the Agent (collectively, “Surrender
Documents”):
(i) subject
to the terms of the Escrow & Exchange Agreement, the Company Holder shall be
entitled to receive in exchange therefore, (A) certificates, registered to
such
Company Holder, evidencing such number of shares of Parent Common Stock as
to
which he, she or it is entitled pursuant to Section 1.6 above or 1.9, (B)
if the
Company Holder is an Optionholder, an option agreement, registered to such
Company Holder, evidencing the Parent Option as to which he, she or it is
entitled pursuant to Section 1.7 above, (C) if the Company Holder is a
Warrantholder, a warrant agreement, registered to such Company Holder,
evidencing the Parent Warrant as to which he, she or it is entitled pursuant
to
Section 1.8 above, (D) if the Company Holder is a Secured Lender, a warrant
agreement, registered to such Company Holder, evidencing the Parent Secured
Warrant as to which he, she or it is entitled pursuant to Section 1.9, and/or
(E) if the Company Holder is a Bridge Investor, a warrant agreement, registered
in the name of such Bridge Investor, evidencing the Parent Bridge Warrant
to
which he, she or it is entitled pursuant to Section 1.10 above, in each case,
after giving effect to the remaining provisions of this Section 2.2,
and
(ii) the
surrendered Certificate shall immediately be canceled.
(d) No
dividends or other distributions declared or made after the Effective Time
with
respect to Parent Common Stock with a record date after the Effective Time
will
be paid to a Company Holder with respect to the shares of Parent Common Stock
to
be issued to him, her or it as Merger Consideration until such Company Holder
has surrendered to the Agent the Surrender Documents. No interest will be
paid
or accrued with respect to any Merger Consideration deliverable upon due
surrender of any Certificate (or delivery of an Affidavit of Loss). In the
event
of a transfer of ownership of Company Stock, Company Options, Company Warrants,
Secured Warrants or a Bridge Note (each, a “Company
Security”)
that
is not registered in the transfer records of the Company, payment may be
made to
a transferee if, and only if, the Certificate representing such Company Security
is presented to the Agent, accompanied by all documents required to evidence
and
effect such transfer together with evidence that any applicable transfer
taxes
have been paid. Until surrendered as contemplated by this Section 2.2, each
Certificate (other than the Certificates representing Dissenting Shares)
shall
be deemed at any time after the Effective Time for all purposes to represent
only the right to receive upon such surrender the Merger Consideration which
the
holder thereof has the right to receive in respect of such Certificate pursuant
to this Section 2.2. Certificates representing Dissenting Shares shall be
deemed
at any time after the Effective Time for all purposes to represent only the
right to receive the fair value of such Dissenting Shares pursuant to the
DGCL.
10
(e) No
Further Ownership Rights.
All
Merger Consideration paid in exchange of Company Securities shall be deemed
to
have been paid in full satisfaction of all rights pertaining to such Company
Securities. After the Effective Time, there shall be no further registration
of
transfers on the stock transfer books of the Surviving Corporation of the
Company Securities that were outstanding immediately prior to the Effective
Time. If, after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided
in
this Section 2.2, subject to applicable Law in the case of Certificates
representing Dissenting Shares. From and after the Effective Time, Company
Holders shall cease to have any rights as stockholders, optionholders,
warrantholders or investors of the Company, as applicable, except as provided
by
Law.
(f) No
Liability.
None of
Parent, the Company, the Surviving Corporation or the Agent shall be liable
to
any Company Holder for any amount properly paid to a Governmental Authority
pursuant to any applicable abandoned property, escheat or similar
Law.
(g) Withholding
Rights.
Parent,
the Surviving Corporation and the Agent shall be entitled to deduct and withhold
from the Merger Consideration otherwise payable to any Company Holder such
amounts as may be required to be deducted and withheld with respect to the
making of such payment under the Code or under any provision of any state,
county, local or foreign tax Law, such deductions and withholdings to be
effected by reducing the number of shares of Parent Common Stock issuable
to a
Company Holder, or the number of shares of Parent Common Stock subject to
a
Parent Option, Parent Warrant, Parent Secured Warrant or Parent Bridge Warrant
issuable to a Company Holder, as applicable, based on a per Parent Common
Stock
value equal to the Parent Signing Price. To the extent that amounts are so
withheld by Parent, the Surviving Corporation or the Agent, such withheld
amounts shall be treated for all purposes of this Agreement as having been
paid
to the Company Holder.
(h) Rounding.
Parent,
the Company and the Holder Representative shall act in good faith to implement
rounding procedures to ensure that each Company Holder receives such number
of
shares of Parent Common Stock equal to (i) the aggregate number of shares
of
Company Common Stock owned by such Company Holder immediately prior to the
Effective Time, plus
the
aggregate number of shares of Company Common Stock issuable upon conversion
of
Company Preferred Stock immediately prior to the Effective Time, multiplied
by
(ii) the
Per Share Merger Consideration.
11
(i) Fractional
Shares.
No
fraction of a share of Parent Common Stock will be issued by virtue of the
Merger, and each Company Holder who would otherwise be entitled to a fraction
of
a share of Parent Common Stock (after giving effect to Section 2.2(f) and
(g)
above) shall receive, in lieu of such fractional share, an amount in cash
based
on the Parent Signing Price.
ARTICLE
III
Except
as
disclosed by the Company in the Company’s Disclosure Schedule, dated as of the
date of this Agreement and delivered by the Company to Parent together with
this
Agreement (the “Company’s
Disclosure Schedule”),
the
Company hereby represents and warrants to Parent and Acquisition Sub as follows:
3.1. Organization,
Good Standing and Qualification of the Company.
The
Company is a corporation validly existing and in good standing under the
DGCL,
and is qualified or licensed as a foreign corporation to do business, and
is in
good standing, in the jurisdictions listed in Section 3.1 to the Company’s
Disclosure Schedule, which jurisdictions are the jurisdictions where the
character of the properties owned, leased or operated by it or the nature
of its
activities makes such qualification or licensing necessary, except for those
jurisdictions where the failure to be so qualified, licensed or in good standing
would not have a Company Material Adverse Effect. The Company has the corporate
power and authority, and is in possession of all Approvals necessary, to
own,
lease and operate its properties and to carry on its business as it is now
being
conducted or as currently proposed to be conducted, other than those, the
failure of which to possess would not have a Company Material Adverse Effect.
The Company has previously provided to Parent and Acquisition Sub true, correct
and complete copies of (a) its Certificate of Incorporation and all amendments
thereto or restatements thereof, and (b) its By-Laws and all amendments thereto
or restatements thereof. Such Certificate of Incorporation and By-Laws are
in
full force and effect.
3.2. No
Subsidiaries.
The
Company does not own, directly or indirectly, any equity, partnership,
membership or similar interest in, or any interest convertible into or
exchangeable or exercisable for, any equity, partnership, membership or similar
interest in, any Person, nor is it under any obligation to form or participate
in, or make any loan, capital contribution or other investment in, any
Person.
(a) The
Company has all necessary corporate power and authority to execute and deliver
this Agreement, each Related Agreement to which it is a party and each other
instrument or document required to be executed and delivered by it pursuant
to
this Agreement or any such Related Agreement, and to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated
hereby
and thereby. The execution and delivery by the Company of this Agreement
and
each Related Agreement to which it is a party, the performance of its
obligations hereunder and thereunder, and the consummation by the Company
of the
transactions contemplated hereby and thereby, have been duly and validly
authorized by all corporate action on the part of the Company and no other
corporate proceedings on the part of the Company are necessary to authorize
this
Agreement or any Related Agreement to which it is a party or to consummate
the
transactions so contemplated hereby and thereby other than the giving of
notice
to the stockholders of the Company and the adoption of this Agreement and
the
approval of the Merger by the stockholders of the Company in accordance with
the
DGCL.
12
(b) This
Agreement has been, and each of the Related Agreements to which the Company
is a
party, when executed and delivered by the other parties hereto and thereto
will
be, duly and validly executed and delivered by the Company and (assuming
the due
authorization, execution and delivery by the other parties hereto and thereto)
this Agreement constitutes, and each Related Agreement to which the Company
is a
party, when executed and delivered, will constitute, a legal, valid and binding
obligation of the Company enforceable against the Company in accordance with
its
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws affecting creditors’ rights and remedies generally, and
subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in
equity).
3.4. Capitalization.
(a) The
authorized capital of the Company consists of (i) 90,000,000 shares of Company
Common Stock, and (ii) 73,361,921 shares of Company Preferred Stock, of which
13,296,988 shares are designated as Series A Preferred Stock, 45,454,545
shares
are designated as Series B Preferred Stock, 7,142,857 shares are designated
as
Series C Preferred Stock, 1,038,961 shares are designated as First Strategic
Preferred Stock and 6,428,570 shares are designated as Second Strategic
Preferred Stock. As of the date of this Agreement, there are (i) 5,143,318
shares of Company Common Stock issued and outstanding; (ii) 13,250,000 shares
of
Series A Preferred Stock issued and outstanding; (iii) 45,454,545 shares
of
Series B Preferred Stock issued and outstanding; (iv) 2,499,999 shares of
Series
C Preferred Stock issued and outstanding; (v) 1,038,961 shares of First
Strategic Preferred Stock issued and outstanding; (vi) 2,857,142 shares of
Second Strategic Preferred Stock issued and outstanding; (vii) no shares
of
Company Common Stock held in the treasury of the Company; (viii) no shares
of
Company Preferred Stock held in the treasury of the Company; (ix) 6,468,136
shares of Company Common Stock reserved for issuance pursuant to outstanding
Company Options granted under the Company’s Option Plan; (x) 3,788,546 shares of
Company Common Stock reserved for future issuance pursuant to Company Options
not currently outstanding but eligible to be granted under the Company’s Option
Plan, and (xi) 46,988 shares of Company Common Stock and 6,107 shares of
Company
Preferred Stock reserved for future issuance pursuant to the Company Warrants.
(b) Section
3.4(b) of the Company’s Disclosure Schedule identifies the name of, and the
number and type of shares of Company Stock held by each Stockholder as of
the
date of this Agreement and, with respect to shares of Company Preferred Stock,
the number of shares of Company Common Stock issuable upon conversion thereof
(excluding shares of Company Common Stock issuable upon conversion of accrued
and unpaid dividends). All outstanding shares of capital stock of the Company
are duly authorized, validly issued, fully paid and non-assessable.
13
(c) Section
3.4(c) of the Company’s Disclosure Schedule lists all Company Options and
Company Warrants outstanding as of the date of this Agreement, including
with
respect to each such Company Option and Company Warrant (i) the record holder
thereof, (ii) the exercise price thereof, and (iii) the number of shares
of
Company Common Stock or Company Preferred Stock that remain subject to such
Company Option or Company Warrant, as applicable, and, with respect to shares
of
Company Preferred Stock underlying Company Warrants, the number of shares
of
Company Common Stock issuable upon conversion thereof (excluding shares of
Company Common Stock issuable upon conversion of accrued and unpaid dividends)),
in each case, without regard to vesting. All outstanding Company Options
that
were granted under the Company’s Option Plan, have been duly authorized and
validly issued. All outstanding Company Warrants have been duly authorized
and
validly issued. If and to the extent issued, all Secured Warrants and Bridge
Notes will have been duly authorized and validly issued. The Company has
provided Parent with true, correct and complete copies of (A) its standard
form
of option agreement, (B) any option agreement which deviates in any material
respect from the standard form of option agreement, (C) the Company’s Option
Plan, (D) its standard form of warrant agreement, and (E) any warrant agreement
which deviates in any material respect from the standard form of warrant
agreement. If issued, the Company will provide Parent with true, correct
and
complete copies of the Secured Warrants and the Bridge Notes.
(d) As
of the
date hereof, there are no (i) except as set forth in Section 3.4(c) above,
reserved or outstanding securities, options (whether vested or unvested),
warrants, calls, rights, commitments or agreements to which the Company is
a
party or by which it is bound obligating the Company to issue, deliver or
sell,
or cause to be issued, delivered or sold, additional shares of capital stock
or
other securities of the Company, (ii) outstanding obligations, contingent
or
otherwise, of the Company to repurchase, redeem or otherwise acquire any
shares
of capital stock (or options to acquire any such shares) or other securities
or
equity interests of the Company, (iii) outstanding stock appreciation rights,
phantom stock or other equity equivalent or equity-based awards or rights
to
which the Company is a party or by which it is bound, and the Company is
not
obligated to grant or issue any of the foregoing, (iv) voting trusts, proxies,
rights plans, anti-takeover plans or other agreements to which the Company
is a
party or by which it is bound, or to the Company’s Knowledge, to which any of
its stockholders are a party, with respect to the issuance, holding,
acquisition, registration, voting or disposition of any shares of capital
stock
or other securities or equity interests of the Company, or (v) except as
disclosed in Section 3.4(d)(v) of the Company’s Disclosure Schedule and as
required under the Company’s Certificate of Incorporation as in effect as of the
date of this Agreement, declared or accrued unpaid dividends with respect
to any
of the Company’s securities and the Company has no obligation (contingent or
otherwise) to declare or pay any dividend with respect to any of its securities
or to make any other distribution in respect thereof.
(e) Except
as
set forth in Section 3.4(e) of the Company’s Disclosure Schedule, none of the
shares of Company Stock, Company Options or Company Warrants were issued
or have
been transferred in violation of, or are subject to, any preemptive rights
or
rights of first offer. If and to the extent issued, the Secured Warrants
and the
Bridge Notes will be issued without violation of, and the transfer will not
be
subject to, any preemptive rights or rights of first offer.
14
3.5. Consents
and Approvals.
Except
as set forth in Section 3.5 of the Company’s Disclosure Schedule, the execution
and delivery by the Company of this Agreement and each Related Agreement
to
which it is a party do not, and the performance by the Company of its
obligations under this Agreement and each Related Agreement to which it is
a
party shall not, require the Company to obtain any Approval of any Person,
or
give notification to or observe any waiting period imposed by, or make any
filing with or notification to, any Governmental Authority, except for (a)
the
filing of the S-4 with the SEC, in accordance with the Securities Act, (b)
applicable requirements, if any, of the Securities Act, the Exchange Act,
Blue
Sky Laws, and the rules and regulations thereunder, (c) any request under
the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the
“HSR
Act”),
from
the United States Federal Trade Commission or the United States Department
of
Justice or any other Governmental Authority for additional information, letters
to the Company from the accountants, documents or other materials relating
to
the pre-merger notification requirements of the HSR Act, (d) any notices
required under the U.S. Federal Food, Drug, and Cosmetic Act, as amended
(the
“FD&C
Act”),
(e)
the filing of the Certificate of Merger in accordance with the DGCL, and
(f)
such other Approvals as are not material to the operation of the business
of the
Surviving Corporation from and after the Effective Time.
3.6. No
Violation.
Except
as set forth in Section 3.6 of the Company’s Disclosure Schedule, the execution
and delivery by the Company of this Agreement and each Related Agreement
to
which it is a party do not, and the performance by the Company of its
obligations under this Agreement and each Related Agreement to which it is
a
party, will not (a) conflict with or violate any provision of its Certificate
of
Incorporation or By-Laws as currently in effect, (b) conflict with or violate
any Law or Order to which the Company is subject or by which any of its
properties are bound, or (c) conflict with, result in any breach or violation
of
or constitute a default (or an event that with notice or lapse of time or
both
would become a default) under, materially impair the Company’s rights or alter
the rights or obligations of any third party under, result in the triggering
of
any event or increase of any payment to any Person, or give to others any
rights
of termination, amendment, acceleration or cancellation of, or result in
the
creation of a Lien on any of the properties or assets of the Company pursuant
to, any Company Contract or Company License to which the Company is a party
or
by which the Company or its properties is bound or subject, which conflict,
violation, breach or default, in the case of subsections (b) and (c) hereof,
would have a Company Material Adverse Effect.
3.7. Corporate
Books.
The
books of account, minute books, stock certificate books and stock transfer
ledgers and other similar books and records of the Company (a) have at all
times
been maintained in accordance with good business practice, are complete and
correct in all material respects and there have been no material transactions
that are required to be set forth therein and which are not so set forth,
and
(b) contain true, complete and accurate records of all meetings and consents
in
lieu of meetings of board(s) of directors (and any committees thereof), similar
governing bodies, if any, stockholders and other equity holders as applicable.
The stock, warrant, option and other equity interest transfer and ownership
records of the Company contain true, complete and accurate records of the
securities ownership as of the date of this Agreement and all transfers
involving the capital stock and other securities since the Company’s inception.
True, correct and complete copies of all of the foregoing have been provided
to
Parent.
15
3.8. Licenses
and Permits.
Except
for matters governed by Environmental Laws which are addressed in Section
3.12
below, the Company has all material licenses, permits, consents, approvals,
authorizations, registrations, qualifications and certifications or other
action
of, or any filing, registration or qualification with, any Governmental
Authority necessary for the business operations of the Company as currently
conducted (collectively, the “Company
Licenses”).
Except for such defaults as would not have a Company Material Adverse Effect,
there currently is no default under any Company License which has not been
cured. Except as set forth in Section 3.8 of the Company’s Disclosure Schedule,
there is no Action pending or to the Company’s Knowledge, threatened, and no
event has occurred or is reasonably expected to occur, that could result
in the
termination, revocation, limitation, suspension, restriction or impairment
of
any Company License or the imposition of any fine, penalty or other sanctions
for violation of any legal or regulatory requirements relating to any Company
License.
3.9. Required
Vote.
(a) The
Company’s Board of Directors, by the unanimous vote of all of the directors
participating at a meeting duly called and held (which directors constitute
a
majority of the directors then in office), or by an executed written consent
in
lieu of a meeting, has (i) approved and declared advisable this Agreement
and
approved each Related Agreement to which the Company is a party, (ii) determined
that the transactions contemplated hereby and thereby are advisable, fair
to and
in the best interests of the Company and its stockholders, (iii) resolved
to
recommend adoption of this Agreement, and the approval of the Merger, the
Related Agreements to which the Company is a party and the other transactions
contemplated hereby and thereby to its stockholders and (iv) directed the
submission of this Agreement to the Company’s stockholders for their
adoption
(b) The
affirmative vote of at least (i) a majority of all outstanding capital stock
of
the Company, with the Company’s Preferred Stock voting on as converted to
Company Common Stock basis, voting as a class, and (ii) 66⅔% of all outstanding
shares of Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock voting as a class (such holders, collectively, the “Requisite
Holders”),
at a
special meeting of the Stockholders, or the approval of such Requisite Holders
evidenced by executed written consent in lieu of a special meeting, are the
only
votes of the holders of any class or series of capital stock of the Company
necessary to adopt this Agreement, and to approve the Merger, the Related
Agreements to which the Company is a party and the other transactions
contemplated hereby and thereby (“Company
Stockholder Approval”).
Concurrently with the execution and delivery of this Agreement, the Principal
Stockholders, who together constitute the Requisite Holders, have executed
and
delivered (for the benefit of the Company and Parent) the Voting Agreement
pursuant to which, and subject to the terms and conditions thereof, each
of them
have agreed to vote their respective shares of Company Stock in favor of
the
adoption of this Agreement, and the approval of the Merger, the Related
Agreements to which the Company is a party and the other transactions
contemplated hereby and thereby at any special meeting of Stockholders held
for
such purpose or, alternatively, to consent in writing to the adoption of
this
Agreement, and the approval of the Merger, the Related Agreements to which
the
Company is a party and the other transactions contemplated hereby and
thereby.
16
(a) The
Company owns legally and beneficially, and has good title to, all assets
purported to be owned by it (collectively, the “Company
Assets”),
including: (i) all assets reflected on the Interim Financial Statements;
(ii)
all assets referred to in the Company’s Disclosure Schedule and all of the
rights of the Company under the Company Contracts; and (iii) all other assets
reflected in its respective books and records as being owned by the Company.
Except as set forth in Section 3.10 of the Company’s Disclosure Schedule, the
Company owns the Company Assets, free and clear of all Liens other than
Permitted Liens.
(b) With
respect to personal properties and assets that are leased, the Company has
a
valid leasehold interest in such properties and assets and all such leases
are
in full force and effect and, to the Company’s Knowledge, constitute valid and
binding obligations of the other party(ies) thereto. Neither the Company
nor, to
the Company’s Knowledge, any other party thereto is in violation of any of the
terms of such lease, the violation of which would constitute a Company Material
Adverse Effect.
(c) All
material assets owned by or leased to the Company are adequate for the uses
to
which they are being put, are in good condition and repair (excluding (i)
ordinary wear and tear, and (ii) deferred maintenance requirements in an
amount
not to exceed $100,000 in the aggregate) and are adequate for the conduct
of the
Company’s business, as applicable, in the manner in which such business is
currently being conducted.
3.11. Real
Property.
(a) The
Company does not own any real property.
(b) Section
3.11(b) of the Company’s Disclosure Schedule identifies all real property leased
by the Company (“Leased
Real Property”).
True,
correct and complete copies of all of the leases, subleases, licenses or
other
contracts pursuant to which the Company leases Leased Real Property
(collectively, “Real
Property Leases”)
have
been provided to Parent. The Company has not leased, subleased, licensed
or
sublicensed, or otherwise granted to any Person, the right of use or occupancy
of any portion of the Leased Real Property.
3.12. Environmental
Matters.
(a) Except
as
listed in Section 3.12(a) of the Company’s Disclosure Schedule, no Environmental
Claim has been issued or filed, no penalty has been assessed and no Action
is
pending or to the Company’s Knowledge, threatened by any Governmental Authority
or any Third Party, which Environmental Claim, penalty, or Action would have
a
Company Material Adverse Effect, with respect to: (i) any alleged violation
of,
noncompliance by the Company with, or Liability of the Company under, any
Environmental Law or Order by which the Company or any of its assets are
bound,
(ii) any alleged failure by the Company to have or comply with any Environmental
Permits, or (iii) the manufacture, processing, distribution, use, generation,
treatment, storage, disposal, transportation, abatement, release, exposure
to
removal, remediation, possession or handling by the Company, or presence
on,
under or above, or discharge from, the Leased Real Property of Hazardous
Substances in violation of any Environmental Law or Order. The Company has
not
(A) been notified that it is potentially liable, (B) received any requests
for
information or other correspondence concerning any site or facility, or (C)
received any notice that it is considered potentially liable, under the
Comprehensive Environmental Response Compensation and Liability Act, 42 U.S.C.
§§ 9601 et seq.
17
(b) Except
as
disclosed in Section 3.12(b) of the Company’s Disclosure Schedule, the Company
and, to the Company’s Knowledge, the Leased Real Property are and have been in
compliance in all material respects with all applicable Environmental Laws,
which compliance includes the possession by or the taking of appropriate
steps
to obtain by the Company of all Environmental Permits and other Approvals
required under applicable Environmental Laws, and compliance in all material
respects with the terms and conditions thereof.
(c) There
are
no above-ground and, to the Company’s Knowledge, no underground storage tanks,
oil/water separators, sumps and septic systems located on the Leased Real
Property.
(d) The
Company is not in possession of, and has no Knowledge of, any environmental
reports, audits, assessments and investigations relating to the Leased Real
Property.
(a) The
Company has provided to Parent true, complete and correct copies of the audited
balance sheet of the Company as at December 31, 2006, December 31, 2005 and
December 31, 2004 and the related audited consolidated statements of income,
cash flow and stockholders’ equity for the fiscal year then ended, certified by
the Company’s independent public accountants and accompanied by a copy of such
auditor’s report (the “Year-End
Financial Statements”),
and
the unaudited balance sheet of the Company as of September 30, 2007
(“Interim
Balance Sheet”)
and
the related unaudited consolidated statements of income, cash flow and
stockholders’ equity for the nine months then ended (the “Interim
Financial Statements”
and,
together with the Year-End Financial Statements, the “Financial
Statements”).
The
Financial Statements were prepared in accordance with the books and records
of
the Company and fairly present in all material respects the financial condition
of the Company as of the dates indicated, and the results of operations and
cash
flows of the Company for the respective periods indicated, in accordance
with
U.S. generally accepted accounting principles (“GAAP”),
applied on a consistent basis throughout the periods indicated (unless otherwise
required by GAAP) except that the Interim Financial Statements are subject
to
customary inter-period and year-end adjustments (which will not, individually
or
in the aggregate, be material in magnitude) and do not contain all footnotes
required by GAAP.
(b) Except
as
otherwise noted in the Financial Statements, the accounts and notes receivable
of the Company reflected on the balance sheets included in the Financial
Statements (i) arose from bona fide transactions in the ordinary course of
business and are payable on ordinary trade terms, (ii) are legal, valid and
binding obligations of the respective debtors enforceable in accordance with
their terms, except as such may be limited by bankruptcy, insolvency,
reorganization, or other similar laws affecting creditors’ rights generally, and
by general equitable principles, (iii) are not subject to any valid set-off
or
counterclaim except to the extent set forth in such balance sheet contained
therein, and (iv) are not the subject of any Actions brought by or on behalf
of
the Company.
18
(c) Significant
deficiencies in the financial reporting of the Company which are reasonably
likely to materially and adversely affect the ability to record, process,
summarize and report financial information, letters to the Company from the
accountants, and any fraud whether or not material that involves management
or
other employees who have a significant role in financial reporting, have
been
adequately and promptly disclosed to the independent accountants and management
of the Company as required by applicable Law.
(d) Except
for liabilities identified as such in the Interim Financial Statements
(including the footnotes thereto) the Company has no accrued, contingent
or
other Liabilities of any nature, either matured or unmatured and whether
due or
to become due of a type required to be reflected in financial statements
prepared in accordance with GAAP, other than (i) liabilities or obligations
incurred in the ordinary course of business and consistent with past practice
in
nature and amount since September 30, 2007, (ii) Transaction Expenses, (iii)
liabilities not yet due under Company Contracts, to the extent the nature
and
magnitude of such liabilities can be specifically ascertained by reference
to
the text of such Company Contracts, and (iv) liabilities identified in Section
3.13(d) of the Company’s Disclosure Schedule.
3.14. Absence
of Certain Events.
Except
as set forth in Section 3.14 of the Company’s Disclosure Schedule or in the
Interim Financial Statements, since September 30, 2007, the Company has
conducted its business in the ordinary course and consistent with past practice.
Since September 30, 2007, except as set forth in Section 3.14 of the Company’s
Disclosure Schedule, there has not been:
(a) any
sale,
assignment, license or other disposition, of any material portion of the
assets
or properties of the Company, except in the ordinary course of business,
consistent with past practice in nature and amount, and in an aggregate amount
not to exceed $1,500,000;
(b) any
damage, destruction or loss of any of the material assets or properties of
the
Company by fire or other casualty, whether or not covered by
insurance;
(c) any
termination (other than in accordance with its terms), modification or amendment
of any material Contract to which the Company is a party except for any such
termination, modification or amendment that could not reasonably be expected
to
have a Company Material Adverse Effect;
(d) any
change in the Company’s auditors, any of the accounting principles adopted by
the Company or any change in the Company’s accounting policies, procedures,
practices or methods with respect to applying such principles, other than
as
required by GAAP or by applicable Law;
(e) any
(i)
establishment or adoption by the Company of any Company Plan, (ii) payment
by
the Company of any bonus, profit sharing or similar payment to, or increase
in
the amount of the wages, salary, commissions, fringe benefits or other
compensation or remuneration payable to, any of its directors, officers or
employees other than increases in the ordinary course of business, consistent
with past practice in nature and amount, which increases, in the aggregate
are
not material to the Company, (iii) any termination of any officer or other
key
personnel of the Company or, to the Company’s Knowledge, any expression of
intention by any such officer or key personnel to terminate employment with
the
Company, (iv) any granting of, or increase in, severance or termination pay
or
change of control payment, or (v) any entry into any currently effective
employment, severance, termination or indemnification agreement or any agreement
the benefits of which are contingent or the terms of which are materially
altered upon the occurrence of a transaction involving the Company of the
nature
contemplated hereby;
19
(f) any
cancellation or forfeiture of any material debts or claims of the Company
or any
waiver of any rights of material value to the Company;
(g) any
incurrence, assumption or guarantee by the Company of any Indebtedness for
borrowed money other than in the ordinary course of business consistent with
past practice in nature and amount, and in an aggregate amount not to exceed
$1,000,000;
(h) any
loan,
advance or capital contribution made by the Company to, or investment in,
any
Person other than (i) loans or advances to employees in connection with
business-related travel and entertainment, in each case made in the ordinary
course of business consistent with past practice in nature and amount, and
(ii)
liabilities set forth on Section 3.13(d) of the Company’s Disclosure Schedule;
(i) any
declaration, setting aside or payment of any dividend on, or other distribution
(whether in cash, stock or property) in respect of, any of class or series
of
the Company’s capital stock, or any purchase, redemption or other acquisition by
the Company of any shares of its capital stock or any other securities of
the
Company or any options, warrants, calls or rights to acquire any such shares
or
other securities;
(j) any
written notice to the Company that any material Contract to which the Company
was or is a party has been breached, repudiated or terminated or will be
breached, repudiated or terminated;
(k) any
capital expenditure by the Company which, when added to all other capital
expenditures made on behalf of the Company since December 31, 2006, exceeds
$150,000;
(l) any
revaluation by the Company of any of its assets, including, without limitation,
writing down the value of capitalized inventory or writing off notes or accounts
receivable;
(m) any
Company Material Adverse Effect; or
(n) any
written or oral agreement, understanding, authorization or proposal for the
Company to take any of the actions specified in this Section 3.14.
3.15. Legal
Proceedings; Orders.
Except
for matters governed by Environmental Laws which are addressed in Section
3.12
and except as set forth in Section 3.15 of the Company’s Disclosure Schedule,
(a) there is no Action pending or, to the Company’s Knowledge, threatened by or
against the Company or relating to the Company or its business or properties,
except for any of the foregoing that could not reasonably be expected to
have a
Company Material Adverse Effect, and (b) no officer or director of the Company
is a defendant in any Action in connection with his or her status as such.
Neither the Company, nor any material property or asset of the Company, is
subject to any outstanding Order. There is no unsatisfied material judgment,
penalty or award against or affecting the Company or any of its properties
or
assets.
20
3.16. Compliance
with Laws.
Except
for matters governed by Environmental Laws which are addressed in Section
3.12
and the Actions addressed in Section 3.15, the Company is, and at all times
has
been, in compliance in all material respects with all Laws applicable to
it or
its assets or properties. The Company has not received any notice to the
effect
that it is not in compliance with any Laws and there is no Action pending
or, to
the Company’s Knowledge, threatened by any Governmental Authority with respect
to any alleged violation by the Company of any applicable Law.
3.17. Employment
and Labor Matters.
(a) Set
forth
in Section 3.17(a) of the Company’s Disclosure Schedule is a list of all
employees, officers and directors of the Company and each such individual’s (i)
rate of pay or annual compensation (including actual or potential bonus
payments, deferred or contingent compensation, pensions, “golden parachutes” and
other similar benefits paid or payable in the current fiscal year, (ii) job
title, (iii) status of employment or engagement, (iv) date of hire or engagement
and (v) annual vacation, sick and other paid time off allowance. Also set
forth
in Section 3.17(a) of the Company’s Disclosure Schedule is a list of each
independent contractor and consultant of the Company whose engagement by
the
Company is not terminable by the Company upon 90 or less days notice and,
with
respect to each such Person, a brief description of the services provided
to the
Company and such Person’s rate of pay.
(b) Except
as
set forth in Section 3.17(b) of the Company’s Disclosure Schedule, (i) there are
no employment, consulting, independent contractor, severance pay, continuation
pay, termination or indemnification Contracts, covenants not to compete,
golden
parachute agreements, or any other employment or service-related Contracts,
between the Company and (A) any current stockholder, officer, director or
employee or, to the extent that the Company has any continuing obligations,
any
former stockholder, officer, director or employee, or (B) any current
independent contractor or consultant whose engagement with the Company is
not
terminable on less than 90 days notice or, to the extent that the Company
has
any continuing obligations, any former independent contractor or consultant,
and
(ii) there are no obligations to pay bonuses, change of control payments
or
other forms of compensation arising, vesting (whether fully or partially)
or
payable (whether or not at the Closing), to directors, officers, employees,
consultants or agents of the Company as a result of the consummation of the
transactions contemplated by this Agreement (but excluding bonus compensation
payable in the ordinary course of business consistent with past practice
that is
not contingent on the consummation of such transactions).
(c) Each
of
the Company’s current and former officers, directors, employees, independent
contractors and consultants have entered into the Company’s standard form of
non-disclosure, non-solicitation and assignment of inventions agreement (a
copy
of which has been provided to Parent), and, to the Company’s Knowledge, no such
person has breached such agreement.
21
(d) The
Company is not a party to any collective bargaining Contracts or any other
Contracts with any labor unions or other representatives of any employees
of the
Company, and no such Contract is being negotiated, nor to the Company’s
Knowledge, are any union organizing efforts underway or threatened. There
is no
charge or complaint against the Company by the National Labor Relations Board
or
any comparable state or foreign agency pending or to the Company’s Knowledge,
threatened to the effect that the Company, any Subsidiary or their
representatives or employees, has committed any unfair labor practices in
connection with the operation of the business of the Company. There has not
been
any labor strike, dispute, claim, charge, lawsuit, proceeding, labor slowdown
or
stoppage and none of such actions are pending or to the Company’s Knowledge,
threatened against or involving the Company or with respect to any employees
of
the Company. No event has occurred, or to the Company’s Knowledge, circumstance
exists that could provide the basis for any work stoppage or other labor
dispute.
(e) The
Company has not implemented any plant closing or layoff of employees that
could
implicate the WARN Act or any similar state or local statute or
regulation.
(f) The
Company is currently in material compliance with all applicable Laws relating
to
the employment of labor, including those related to wages, hours, and the
payment and withholding of taxes and other sums as required by the appropriate
Governmental Authority and has withheld and paid to the appropriate Governmental
Authority or is holding for payment not yet due to such Governmental Authority
all amounts required to be withheld from employees of the Company and is
not
liable for any arrears of wages, taxes, penalties or other sums for failure
to
comply with any of the foregoing. The Company is not delinquent in payments
to
any of its employees for any wages, salaries, commissions, bonuses or other
direct compensation for any services performed for it or amounts required
to be
reimbursed to such employees. There is no claim with respect to payment of
wages, salary or overtime pay that has been asserted or is now pending or
to the
Company’s Knowledge, threatened before any Governmental Authority with respect
to any persons currently or formerly employed by the Company. There are no
pending claims against the Company under any workers’ compensation plan or
policy or for long term disability.
(g) There
is
no charge or complaint against the Company by the National Labor Relations
Board
or any comparable state or foreign agency pending or to the Company’s Knowledge,
threatened to the effect that the Company or its representatives or employees
has committed any unfair labor practices in connection with the operation
of the
business of the Company. There is no charge of discrimination in employment
or
employment practices against the Company, for any reason, including, without
limitation, age, gender, race, religion or other legally protected category,
which has been asserted or is now pending or threatened before the United
States
Equal Employment Opportunity Commission (the “EEOC”),
or
any other Governmental Authority in any jurisdiction in which the Company
has
employed or currently employs any person. To the Company’s Knowledge, none of
the Company’s employment policies or practices is currently being audited or
investigated by any Governmental Authority.
22
(h) Each
independent contractor of the Company has been properly classified as an
independent contractor for the purposes of Tax laws, employee classification
laws, laws applicable to employee benefits and other applicable Laws. Each
of
the employees of the Company has been properly classified as either an exempt
or
a non-exempt employee for the purposes of all applicable local, state and
federal wage and hour laws and all employees of the Company has received
the pay
to which they are entitled to under the applicable local, state and federal
wage
and hour laws.
(i) To
the
Company’s Knowledge, no officer, director, agent, employee, consultant, or
contractor of the Company is bound by any contract that purports to limit
the
ability of such officer, director, agent, employee, consultant, or contractor
(i) to engage in or continue or perform any conduct, activity, duties or
practice relating to the business of the Company or (ii) to assign to the
Company or to any other Person any rights to any invention, improvement,
or
discovery. To the Company’s Knowledge, no former or current employee of the
Company is a party to, or is otherwise bound by, any contract that in any
way
adversely affected, affects, or will affect the ability of the Company or
Parent
to conduct the business of the Company as formerly or currently conducted
or as
currently proposed to be conducted.
(j) Except
as
set forth in Section 3.17(j) of the Company’s Disclosure Schedule, there are no
EEOC or state agency lawsuits, charges of discrimination filed with the EEOC
or
a state agency, or any compliance agreements, letters of commitment, settlement
agreements, consent decrees, conciliation agreements with any government
agency,
or other pending or to the Company’s Knowledge, threatened employee
complaints.
(k) Except
as
set forth in Section 3.17(k) of the Company’s Disclosure Schedule, there are
not, and have not been within the last five years (or longer if continuing
obligations remain), any other employment litigation or judgments entered
or
settlement agreements reached.
(l) Except
as
set forth in Section 3.17(l) of the Company’s Disclosure Schedule, none of the
Department of Labor, including OSHA and the Wage and Hour Division, the EEOC
and
similar Governmental Authorities has issued or assessed a penalty, and no
Action
is pending or, to the Company’s Knowledge, threatened, with respect to any
alleged violation of, noncompliance by the Company, or Liability of the Company
under any Labor Law.
(m) The
Company has not committed any unfair labor practice (as determined under
any
applicable Law or regulation).
3.18. Employee
Benefit Plans.
(a) Section
3.18(a) of the Company’s Disclosure Schedule sets forth a list of each Company
Plan that provides benefits in respect of any employee or former employee,
director, officer or consultant (or any dependent or beneficiary) of the
Company. Each Company Plan has been funded and administered in all material
respects in accordance with its terms and applicable Law, including ERISA
and
the Code. For purposes of this Agreement, the term “Company
Plan”
shall
include each “employee benefit plan,” as such term is defined in Section 3(3) of
ERISA, and all bonus, stock or other security option, stock or other security
purchase, stock or other security appreciation rights, incentive, deferred
compensation, retirement or supplemental retirement, severance, golden
parachute, vacation, cafeteria, dependent care, medical care, employee
assistance program, education or tuition assistance programs, insurance and
other similar fringe or employee benefit plans, programs or arrangements,
and
any current or former employment or executive compensation or severance
agreements, written or otherwise, which have ever been sponsored or maintained
or entered into for the benefit of, or relating to, any present or former
employee, manager or director of the Company. The Company has, to the extent
applicable, provided to Parent true, correct and complete copies of (i) each
Company Plan (or, if not written a written summary of its material terms),
including all plan documents, trust agreements, insurance contracts or other
funding vehicles and all amendments thereto, (ii) all summaries and summary
plan
descriptions, including any summary of material modifications, (iii) the
most
recent annual report (Form 5500 series) filed with the IRS with respect to
such
Company Plan (and, if such annual report is a Form 5500R, the corresponding
Form
5500C filed with respect to such Company Plan), (iv) the most recent actuarial
reports or other financial statements relating to such Company Plan, (v)
the
most recent determination or opinion letter, if any, issued by the IRS with
respect to any Company Plan and any pending requests for such a determination
letter, (vi) the most recent nondiscrimination test performed under the Code
(including 401(k) and 401(m) tests) for each Company Plan, and (vii) all
material filings made with any Governmental Authority, including any filings
under the Voluntary Compliance Resolution or Closing Agreement Program or
the
Department of Labor Delinquent Filer Program, and (viii) any other documents,
forms or other instruments relating to any Company Plan reasonably requested
by
Parent. Except as set forth in Section 3.18(a) of the Company’s Disclosure
Schedule, no Company Plan has been established or maintained for employees
living outside of the United States. The Company has made available to Parent
copies of all material documents pursuant to which each Company Plan is
administered.
23
(b) Except
as
set forth in Section 3.18(b) of the Company’s Disclosure Schedule, no Contract
identified in Section 3.17(a) of the Company’s Disclosure Schedule will, as a
result of the transactions contemplated hereby, either require any payment
by
the Company (or the Surviving Corporation) or Parent or any of their respective
subsidiaries or any consent or waiver from any stockholder, officer, director,
employee, consultant or independent contractor, or result in any change in
the
nature of any rights of any stockholder, officer, director, employee, consultant
or independent contractor, including, but not limited to, any accelerated
payments, deemed satisfaction of goals or conditions, new or increased benefits
or additional or accelerated vesting.
(c) Except
as
set forth in Section 3.18(c) of the Company’s Disclosure Schedule, no individual
will as a direct or indirect result of the transactions contemplated hereby,
accrue or receive additional benefits, service or accelerated rights to payments
under any Company Plan, including the right to receive any parachute payment
(as
defined in Section 280G of the Code) or become entitled to severance,
termination allowance or similar payments that could result in the payment
of
any such benefits or payments, and no such benefits, rights or payments have
accrued as of any other transaction or event that remains unsatisfied as
of the
date of this Agreement. Except pursuant to Contracts identified in Section
3.17(a) or as set forth in Section 3.18(c) of the Company’s Disclosure Schedule,
the Company has not been and will not be required to “gross up” or otherwise
compensate any individuals because of the imposition of any excise tax upon
payment to such individual.
24
(d) Neither
the Company nor any ERISA Affiliate maintains or contributes or, in the last
seven years has ever maintained or contributed to, or otherwise participates
or,
in the last seven years participated in, a “defined benefit plan” within the
meaning of Section 3(35) of ERISA or Section 414(j) of the Code, or a plan
that
is subject to the requirements of Section 412 of the Code or Title IV of
ERISA,
or, in the last seven years was, a party to a “multiemployer plan” within the
meaning of Section 3(37), 4001(a)(3), 4063 or 4064 of ERISA or Section 414(f)
of
the Code. For purposes of this Agreement, the term “ERISA
Affiliate”
shall
include any organization that is or has ever been treated as a single employer
with the Company under Sections 414(b), (c), (m) or (o) of the Code or Section
4001(b) of ERISA. No liability under Title IV or ERISA has been incurred
by the
Company or any ERISA Affiliate that has not been satisfied in full, and no
condition exists that would give rise to any such liability thereunder. Except
as set forth in Section 3.18(d) of the Company’s Disclosure Schedule, the
Company does not maintain a Company Plan providing retiree, medical or life
benefits (as defined in Section 3(1) of ERISA) to employees or former employees
after retirement or other separation from service other than as required
by
COBRA.
(e) No
Action
has been brought, is pending or to the Company’s Knowledge, threatened, against
or with respect to any Company Plan, or any fiduciary thereof with respect
to
such fiduciary’s duties to the Company Plan, or the assets of any of the trusts
thereunder. Except as set forth under ERISA, the Code or the terms of the
relevant Company Plan, there are no material restrictions on the rights of
the
Company to amend or terminate any Company Plan without incurring any liability
thereunder.
(f) To
the
Company’s Knowledge, no “party in interest” (as defined in Section 3(14) of
ERISA) or “disqualified person” (as defined in Section 4975(e)(2) of the Code)
with respect to any Company Plan has engaged in any nonexempt “prohibited
transaction” (as described in Section 4975(c) of the Code or Section 406 of
ERISA). No tax under Code Sections 4980B or 5000 has been incurred with respect
to any Company Plan and no circumstances exist that could give rise to such
tax.
(g) Except
as
set forth in Section 3.18(g) of the Company’s Disclosure Schedule, all of the
Company Plans that are intended to be qualified under Section 401(a) of the
Code
have been administered in accordance with their terms and are in compliance
with
the currently applicable provisions of ERISA and the Code, have received
favorable determination letters from the IRS to the effect that such Company
Plans are qualified and that each trust established in connection with any
Company Plan which is intended to be exempt from federal income taxation
under
Section 501(a) of the Code is so exempt, or are entitled to rely on opinion
letters issued to a prototype sponsor, and no such letter has been revoked
and
revocation is not threatened, and no fact or event has occurred that adversely
affects the qualified status of any such Company Plan or the exempt status
of
any such trust.
(h) Except
as
set forth in Section 3.18(h) of the Company’s Disclosure Schedule, each Company
Plan (and related trust, insurance Contract, or fund) complies in form and
in
operation in all material respects with the applicable requirements of ERISA,
the Code, other Laws, and its own terms. There have been no prohibited
transactions or breaches of any of the duties imposed on “fiduciaries” (within
the meaning of ERISA Section 3(21)) by ERISA with respect to the Company
Plans
that could result in any material liability or excise tax under ERISA or
the
Code being imposed on the Company. There is no pending or, to the Company’s
Knowledge, threatened assessment, complaint, proceeding or investigation
of any
kind in any court or Governmental Authority with respect to any Company Plan
(other than routine claims for benefits), nor to the Company’s Knowledge, is
there any basis for one.
25
(i) Each
Company Plan that is a “group health plan” (within the meaning of Section
5000(b)(1) of the Code) has been operated in material compliance with applicable
Law, its terms, and with the group health plan continuation coverage
requirements of Section 4980B of the Code and Sections 601 through 608 of
ERISA
(“COBRA
Coverage”),
Section 4980D of the Code and Sections 701 through 707 of ERISA, Title XXII
of
the Public Health Service Act and the provisions of the Social Security Act,
to
the extent such requirements are applicable. No Company Plan or written or
oral
agreement exists which obligates the Company or any ERISA Affiliate to provide
health care coverage, medical, surgical, hospitalization, death or similar
benefits (whether or not insured) to any employee, former employee or director
of the Company or any ERISA Affiliate following such employee’s, former
employee’s or director’s termination of employment with the Company or any ERISA
Affiliate, including, but not limited to, retiree medical, health or life
benefits, other than COBRA Coverage.
(j) Except
as
set forth in Section 3.18(j) of the Company’s Disclosure Schedule, all
contributions, including insurance premiums, to or with respect to each Company
Plan that are due have been paid in material compliance with all applicable
Laws, and all contributions and insurance premiums for any period ending
on or
before the Closing Date that are not yet due have been paid or accrued in
the
ordinary course of business by the Company or the ERISA Affiliate, as
applicable. All material contributions, transfers and payments in respect
of any
Company Plan, other than transfers incident to an incentive stock option
within
the meaning of Code Section 422, have been or are fully deductible under
the
Code.
(k) Except
as
set forth in Section 3.18(k) of the Company’s Disclosure Schedule, no Company
Plan provides benefits to any individual who is not a current or former employee
of the Company, or the dependents or other beneficiaries of any such current
or
former employee. No Company Plan provides, or has any liability to provide,
life
insurance, medical, severance, or other employee welfare benefits to any
employee or any dependent of any employee beyond retirement or termination
of
service, other than coverage mandated by Law, and neither the Company nor
any
ERISA Affiliate has ever represented, promised or agreed to provide such
to any
employee or employees (whether individually or as a group) other than coverage
mandated by Law.
(l) The
Company has reserved all rights necessary to amend or terminate each of the
Company Plans without the consent of any other person, and the execution
of this
Agreement and the transactions contemplated hereby will not (either alone
or
upon the occurrence of any additional or subsequent events) result in the
triggering or imposition of any restrictions or limitations (other than those
set forth under applicable Laws) on the right of the Company to amend or
terminate any Company Plan.
(m) Except
as
set forth in Section 3.18(m) of the Company’s Disclosure Schedule, no amount
that could be received (whether in cash or property or the vesting of property)
as a result of any of the transactions contemplated by this Agreement by
any
employee, officer or director of the Company or any of its affiliates who
is a
“disqualified individual” (as such term is defined in Treasury Regulation
Section 1.280G-1) under any employment, severance or termination agreement,
other compensation arrangement or Company Plan currently in effect would
be
characterized as an “excess parachute payment” (as such term is defined in Code
Section 280G(b)(1)).
26
(n) Other
than as set forth in Section 3.18(n) of the Company’s Disclosure Schedule, no
Company Plan or other agreement provides for “deferred compensation” subject to
Code § 409A (“Deferred
Compensation Plan”).
No
Company Plan or other agreement providing for equity related based compensation
or payments, including, without limitation, stock options, restricted stock,
phantom stock or performance shares, provides for “deferred compensation”
subject to Section 409A of the Code. Each Deferred Compensation Plan is in
“good
faith” compliance with Section 409A of the Code and the U.S. Treasury guidance
related thereto, through and including Notice 2007-86. Each stock option
or
stock appreciation right issued by the Company or any ERISA Affiliate was
granted with an exercise price equal to or greater than the per share fair
market value (with the meaning of Code § 409A and the guidance issued
thereunder) of the Company’s or affiliate’s common stock, and such common stock
constitutes “service recipient stock” (within the meaning of Treas. Reg. §
1.409A-1(b)(5)(iii)(A)). No amount material to the Company for taxes are
due or
accrued because of violations of Code § 409A.
(o) Each
Company Plan, if any, which is maintained outside of the United States has
been
operated in all material respects in conformance with the applicable statutes
or
governmental regulations and rulings relating to such plans in the jurisdictions
in which such Company Plan is present or operates and, to the extent relevant,
the United States.
(p) Except
as
set forth in Section 3.18(p) of the Company’s Disclosure Schedule, (i) no
Company Plan, excluding any short-term disability, non-qualified deferred
compensation or flexible spending account plan or program, is self-funded,
self-insured or funded through the general assets of the Company or an ERISA
Affiliate, and (ii) no Company Plan which is an employee welfare benefit
plan
under Section 3(1) of ERISA is funded by a trust or is subject to Section
419 or
419A of the Code.
(q) Neither
the Company nor any of its ERISA Affiliates is a party to any union or
collective bargaining agreement.
3.19. Taxes.
(a) Except
as
set forth in Section 3.19(a) of the Company’s Disclosure Schedule, all federal,
state, local and foreign Tax Returns required to be filed (taking into account
extensions) by or on behalf of the Company have been timely filed and have
been
prepared in good faith in accordance with applicable Law. All Taxes due and
payable by or with respect to the Company (whether or not shown on a Tax
Return)
have been timely paid, or such amounts, together with Taxes accruing but
not
subject to Tax Returns required to be filed are reserved for (other than
a
reserve for deferred Taxes established to reflect timing differences between
book and Tax treatment) in accordance with GAAP on the Financial Statements.
Subject to the results of any audit listed on Schedule 3.19(a) of the Company’s
Disclosure Schedule, no Taxes other than those shown on such Tax Returns
or so
reserved for on the Financial Statements are due and payable by or with respect
to the Company. No deficiencies for any Taxes have been proposed, asserted
or
assessed against the Company that are not adequately reserved for on the
Financial Statements.
27
(b) Except
as
set forth in Section 3.19(b) of the Company’s Disclosure Schedule, there are no
pending or, based on written notice, threatened, audits, assessments or other
actions relating to Taxes of the Company. There are no matters under discussion
with any Tax authority, or known to the Company, with respect to Taxes that
are
likely to result in an additional Liability for Taxes with respect to any
of the
Company.
(c) Except
as
set forth in Section 3.19(c) of the Company’s Disclosure Schedule, the Company
has not requested or been granted any waiver of any federal, state, local
or
foreign statute of limitations with respect to, or any extension of a period
for
the assessment of, any Tax which has not since expired. No extension or waiver
of time within which to file any Tax Return of, or applicable to, the Company
has been granted or requested which has not since expired.
(d) No
unsatisfied deficiency, delinquency or default for any Tax has been claimed,
proposed or assessed against or with respect to the Company, nor has the
Company
received notice of any such deficiency, delinquency or default.
(e) The
Company has complied with all applicable Laws relating to the payment and
withholding of Taxes and has, within the time and in the manner required
by Law,
withheld from employee wages and paid over to the proper Governmental
Authorities all amounts required to be so withheld and paid over under all
applicable Laws.
(f) The
Company has provided to Parent true, correct and complete copies of all federal,
state, local and foreign Tax Returns, and any amendments thereto, of the
Company
and its predecessors (if any) for such company’s 2004 Tax year and each year
thereafter, and complete and accurate copies of all examination reports and
statements of deficiencies assessed against or agreed to by the Company or
any
predecessors with respect to such Tax Returns.
(g) The
Company is not a party to any agreement or arrangement that would result,
separately or in the aggregate, in the actual or deemed payment by the Company
that could be disallowed as a deduction under Section 280G or Section 162(m)
of
the Code.
(h) No
power
of attorney (other than powers of attorney authorizing employees and independent
accountants of the Company to act on behalf of the Company) with respect
to any
Taxes has been executed or filed with any Tax authority.
(i) The
Company is not a party to any tax sharing or allocation agreement, nor has
any
of them given any indemnity against Taxes imposed on any other Person, that
has
not expired by its terms or otherwise have been terminated and for which
no
amount is claimed to be owed.
28
(j) The
Company has not been a United States real property holding corporation within
the meaning of Section 897(c)(2) of the Code during the applicable period
specified in Section 897(c)(1)(A)(ii) of the Code.
(k) The
Company will not be required to include any item of income in, or exclude
any
item of deduction from, taxable income for any taxable period (or portion
thereof) ending after the Closing Date as a result of (i) any change in method
of accounting for a taxable period ending on or prior to the Closing Date,
(ii)
any “closing agreement” as described in Section 7121 of the Code (or any
corresponding or similar provision of state, local of foreign Tax law) execute
on or prior to the Closing Date, (iii) any intercompany transaction or any
excess loss account described in the Treasury Regulations under Section 1502
of
Code (or any corresponding or similar provision of state, local or foreign
Tax
law), (iv) any installment sale or open transaction disposition made on or
prior
to the Closing Date, or (v) any prepaid amounts received on or prior to the
Closing Date.
(l) During
the five-year period ending on the date hereof, the Company was not a
distributing corporation or a controlled corporation in a transaction intended
to be governed by Section 355 or Section 361 of the Code.
(m) Except
as
set forth in Section 3.19(m) of the Company’s Disclosure Schedule, the Company
has not issued or assumed (i) any obligations described in Section 279(a)
of the
Code, (ii) any applicable high yield discount obligations, as defined in
Section
163(i) of the Code, or (iii) any registration-required obligations, within
the
meaning of Section 163(f)(2) of the Code, that are not in registered
form.
(n) The
Company (i) is not a party to any “reportable transaction” within the meaning of
Section 1.6011-4 of the Treasury Regulations. The Company has not been a
party
to a transaction that is or is substantially similar to a “listed transaction,”
as such term is defined in Treasury Regulations Section 1.6011 4(b)(2), or
any
other transaction requiring disclosure under analogous provisions of state,
local or foreign Tax law. If the Company has entered into any transaction
such
that, if the treatment claimed by it were to be disallowed, the transaction
would constitute a substantial understatement of federal income tax within
the
meaning of Section 6662 of the Code, then the Company believes that it has
either (a) substantial authority for the tax treatment of such transaction,
or
(b) disclosed on its Tax Return the relevant facts affecting the tax treatment
of such transaction.
3.20. Contracts.
(a) Section
3.20(a) of the Company’s Disclosure Schedule sets forth a list of all Contracts
of the following nature to which the Company is a party or is otherwise bound
or
by which any assets or properties of the Company is subject: (i) all Contracts
for capital expenditure projects in excess of $350,000 for any single project;
(ii) any Contract that relates to any Indebtedness in excess of $350,000;
(iii)
any Contract pursuant to which the Company purchases products or services
which
involves (A) annual payments by the Company of $350,000 or more, or (B)
aggregate payments by the Company under such Contract of more than $350,000
over
the remaining term of such Contract; (iv) any Contract pursuant to which
the
Company sells any product or service to a Third Party which involves annual
payments to the Company of $350,000 or more; (v) any Contract relating to
the
acquisition, transfer, use, development, sharing or license of any technology
or
any Intellectual Property; (vi) any Contract with any Affiliate of the Company;
(vii) any Real Property Lease; (viii) any lease of personal property which
is
material to the business of the Company; (ix) any contract that purports
to
limit the right of the Company to (A) engage or compete in any line of business,
or (B) compete with any person or operate in any location; (x) any acquisition
Contract pursuant to which the Company has “earn-out” or other contingent
payment obligations that would be reasonably likely to result in aggregate
payments in excess of $350,000; (xi) any employment, consulting or independent
contractor (not terminable by the Company on 90 or less days’ notice), bonus,
compensation, pension, insurance, retirement, deferred compensation or other
similar Contract, plan, trust, fund or other agreement for the benefit of
employees, consultants and independent contractors; (xii) all Contracts creating
or relating to any partnership or joint venture or any sharing of revenues,
profits, losses, costs or liabilities; (xiii) all leases of personal property
which are material to the business of the Company; (xiv) all Contracts
concerning research collaboration; and (xv) to the extent not described by
any
of the foregoing subclauses (i) through (xiv), all other Contracts that were
entered into outside the ordinary course of business (collectively, the
“Company
Contracts”).
The
Company has provided to Parent true, correct and complete copies of all Company
Contracts.
29
(b) The
Company is not, nor has it at any time been, in material default under the
terms
of any Company Contract (other than defaults that have been cured or waived
and
for which the Company has no continuing Liability), and the Company has not
received any written notice of any material default under the terms of any
Company Contract. To the Company’s Knowledge, no other party to any Company
Contract is, or is alleged to be, in default under the terms thereof. To
the
Company’s Knowledge, no event has occurred, and no circumstance or condition
exists, that (with or without notice or lapse of time) will, or could reasonably
be expected to, (i) result in a violation or breach of any of the provisions
of
any Company Contract, (ii) give any Person the right to declare a default
or
exercise any remedy under any Company Contract, (iii) give any Person the
right
to accelerate the maturity or performance of any Company Contract, or (iv)
give
any Person the right to cancel, terminate or modify any Company
Contract.
(c) The
Company Contracts are in full force and effect and are valid and binding
obligations of the Company and, to the Company’s Knowledge, the other parties
thereto, except that enforcement thereof may be limited by bankruptcy,
insolvency or similar laws affecting the enforcement of creditor’s rights in
effect from time to time and general principles of equity. The Company has
not
received any notice from any other party to a Company Contract of the
termination or threatened termination thereof, or of any claim, dispute or
controversy with respect thereto.
30
(a) Except
as
set forth in Section 3.21(a) of the Company’s Disclosure Schedule, no Related
Party is currently (i) a party to any transaction with the Company (including,
but not limited to, any Contract providing for the employment of, furnishing
of
goods or services by, rental of real or personal property from, use or
disclosure of Intellectual Property to, borrowing money from or lending money
to, or otherwise requiring payments to, any such Person, but excluding payments
for normal salary and bonuses and reimbursement of expenses), (ii) to the
Company’s Knowledge, the direct or indirect owner of a material interest in any
Person which is a competitor, supplier or customer of the Company, or (iii)
the
direct or indirect owner of any property or assets used in the business of
the
Company.
(b) Except
as
set forth in Section 3.21(b) of the Company’s Disclosure Schedule, no Related
Party has any outstanding Indebtedness payable to the Company and the Company
has not guaranteed any obligation or Indebtedness of any such Related Party
to a
third party.
3.22. Insurance.
Section
3.22 of the Company’s Disclosure Schedule lists, by type, carrier, policy number
and expiration date, of all insurance coverage carried by the Company. All
such
policies are in full force and effect and all premiums which are due and
payable
with respect thereto through the date hereof are currently paid. The Company
has
not received written notice of cancellation or non-renewal of any such policy
or
binder. Such policies are sufficient for compliance with all Laws and Contracts
to which the Company is a party or by which it is bound, to the Company’s
Knowledge, there is no threatened termination of, or material premium increase
with respect to, any policy and none of such polices provides for retroactive
premium adjustments. To the Company’s Knowledge, the Company is not in breach or
default (including any such breach or default with respect to any payment
of
premiums or the giving of notice), and no event has occurred which, with
notice
or lapse of time, would constitute a breach or default, or permit termination
or
modification under the policy. There are no material claims pending involving
an
amount in excess of $25,000 or as to which coverage has been question, denied
or
disputed.
3.23. Certain
Business Practices.
Neither
the Company nor, to the Company’s Knowledge, any director or officer or employee
of the Company (on behalf of the Company), has used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses related to
political activity, made any unlawful payment to foreign or domestic government
officials or employees or to foreign or domestic political parties or campaigns
or violated any provision of the Foreign Corrupt Practices Act of 1977, as
amended, or made any payments in the nature of criminal bribery.
(a) Except
as
set forth on Schedule 3.24(a), the Company owns, is exclusively licensed
or
otherwise possesses the rights to use and license, subject to any existing
licenses or other grants of rights to third parties pursuant to agreements
previously made available to Parent, all patents (including any registrations,
continuations, continuations in part, divisionals, renewals, reexaminations,
reissues and applications therefor), copyrights, trademarks, service marks,
trade names, Uniform Resource Locators and Internet URLs, designs, slogans,
computer programs and other computer software, databases, technology, trade
secrets and other confidential information, know-how, processes, formulae,
algorithms, models, user interfaces, customer lists, inventions, source codes
and object codes, methodologies, architecture, structure, display screens,
layouts, development tools, instructions, templates, trade dress, logos and
all
documentation and media constituting, describing or relating to each of the
foregoing, together with all goodwill related to any of the foregoing, in
each
case as is necessary to conduct their respective businesses as presently
conducted, the absence of which would reasonably be expected to have a Company
Material Adverse Effect (collectively, the “Company
Intellectual Property Rights”).
31
(b) Section
3.24(b) of the Company’s Disclosure Schedule sets forth, with respect to all
Company Intellectual Property Rights registered with any Governmental Authority
or for which an application has been filed with any Governmental Authority,
as
of the date of this Agreement, (i) the registration or application number,
the
date filed and the title, if applicable, of the registration or application
and
(ii) the names of the jurisdictions covered by the applicable registration
or
application.
(c) To
the
Company’s Knowledge, all of the patents, registered trademarks or copyrights
included in the Company Intellectual Property Rights owned or controlled
by the
Company are valid and enforceable. There are no proceedings, claims or
challenges that cause or would cause any patents, registered trademarks or
copyrights included in the Company Intellectual Property Rights owned or
purported to be owned by, the Company to be invalid or unenforceable, or
that
challenge the Company’s rights therein and, to the Company’s Knowledge, there
are no such proceedings, claims or challenges with respect to any licensed
Company Intellectual Property Rights. To the Company’s Knowledge, there are no
facts or prior art that cause or would cause any patents, registered trademarks
or copyrights included in the Company Intellectual Property Rights owned
or
purported to be owned by, or licensed to, the Company to be invalid or
unenforceable. Except as otherwise set forth in Section 3.24(c) of the Company’s
Disclosure Schedule, all necessary registration, maintenance and renewal
fees in
respect of the issuances and registrations of, and applications for the Company
Intellectual Property Rights owned or purported to be owned by the Company,
have
been paid and all necessary documents and certificates have been filed with
the
relevant Government Authority for the purpose of maintaining such Company
Intellectual Property Rights. To the Company’s Knowledge, all necessary
registration, maintenance and renewal fees in respect of the issuances and
registrations of, and applications for the licensed Company Intellectual
Property Rights, have been paid and to the Company’s Knowledge, all necessary
documents and certificates have been filed with the relevant Government
Authority for the purpose of maintaining such Company Intellectual Property
Rights. No act has been done or omitted to be done by the Company which has,
had
or would have the effect of impairing or dedicating to the public, or entitling
any third party to cancel, forfeit, modify or consider abandoned, any Company
Intellectual Property Rights, or give any third party any rights with respect
thereto. To the Company’s Knowledge, the material facts relating to the
Company’s product candidates have been provided to Parent.
(d) The
Company is not, and will not as a result of the consummation of the Merger
or
other transactions contemplated by this Agreement be, in breach in any material
respect of any license, sublicense or other agreement relating to the Company
Intellectual Property Rights, or any licenses, sublicenses and other agreements
to which the Company is a party and pursuant to which the Company uses any
patents, copyrights (including software), trademarks or other intellectual
property rights of or owned by third parties material to the conduct of the
business of the Company (the “Third
Party Intellectual Property Rights”),
in
each case in this Section 3.24(d) other than any such breaches which would
not
reasonably be expected to have a Company Material Adverse Effect.
32
(e) Except
as
set forth in Section 3.24(e) of the Company’s Disclosure Schedule, the Company
has not been named as a defendant in any suit, action or proceeding which
involves a claim of infringement or misappropriation of any Third Party
Intellectual Property Right. The Company has not as of the date of this
Agreement received any written notice of any actual or alleged infringement,
misappropriation or unlawful or unauthorized use of any Third Party Intellectual
Property.
(f) To
the
Company’s Knowledge, no other Person is infringing, misappropriating or making
any unlawful or unauthorized use of any Company Intellectual Property
Rights.
(g) Except
as
otherwise set forth in Section 3.24(g) of the Company’s Disclosure Schedule, the
Company does not pay or receive any royalty to or from a third party with
respect to any Company Intellectual Property Rights, nor has the Company
licensed a third party to use any of the Company Intellectual Property
Rights.
(h) All
rights of the Company in and to the Company Intellectual Property Rights
will be
unaffected by the Merger and the other transactions contemplated hereby.
Without
limiting the foregoing, the consummation of the transactions contemplated
by
this Agreement will not (i) result in the loss of, or otherwise adversely
affect, any rights of the Company in any Company Intellectual Property Rights,
(ii) grant or require Parent or the Company to grant to any third party any
rights with respect to any Intellectual Property, (iii) subject the Parent
or
Company to any increase in royalties or other payments in respect of any
Company
Intellectual Property Rights, or (iv) diminish any royalties or other payments
the Parent or Company or would otherwise be entitled to in respect of any
Company Intellectual Property Rights.
(i) Except
as
set forth in Section 3.24(i) of the Company’s Disclosure Schedule, the Company
is not subject to any judgment with respect to, nor has it entered into or
is it
a party to any Contract which restricts or impairs the use of, any Company
Intellectual Property Rights. Except as otherwise set forth in Section 3.24(i)
of the Company’s Disclosure Schedule, to the Knowledge of the Company, (i) no
Company Intellectual Property Rights misappropriates, violates or conflicts
with, or has misappropriated, violated or conflicted with the Intellectual
Property of any third party, (ii) no services or products sold or currently
contemplated for sale by the Company, are infringing any issued patents owned
by
any third party or would infringe a claim in a published patent application
owned by a third party if any such published patent application becomes an
issued patent containing such claim, and (iii) none of the activities presently
being conducted or planned to be conducted by the Company is infringing or
will
infringe the issued patents of any third party or would infringe a claim
in any
published patent application owned by a third party if any such published
patent
application becomes an issued patent containing such claim. No demand, claim,
notice, inquiry or threat of action by any third party regarding the violation
or infringement by Company of any Intellectual Property of any third party
has
occurred or is currently outstanding.
33
(j) The
Company has not entered into any consent, indemnification, forbearance to
xxx or
settlement agreement with respect to Intellectual Property and no demand,
claim,
notice, inquiry or threat of action has been asserted in writing and to the
Knowledge of the Company, no inquiry or threat of action has been orally
asserted, in each case, by any third party with respect to the validity or
enforceability of, or the Company’s ownership of or right to use, any Company
Intellectual Property Rights owned or purported to be owned by the Company.
No
proceedings or claims in which the Company alleges that any third party is
infringing or otherwise violating any Company Intellectual Property Rights
are
pending, and none have been served by, instituted or asserted by the Company.
To
the Knowledge of the Company, no third party is infringing the Company
Intellectual Property Rights.
(k) To
the
Knowledge of the Company, all trade secrets of the Company have been maintained
in confidence in accordance with the protection procedures customarily used
by
comparable companies in the same industry as the Company to protect rights
of
like importance. All company personnel who have contributed to or participated
in the conception or development of any Company Intellectual Property Rights
have executed and delivered to the Company a confidentiality agreement
restricting such Person’s right to disclose proprietary information of the
Company. To the Knowledge of the Company, no company personnel have any claim
against the Company in connection with such Person’s involvement in the
conception and development of any Company Intellectual Property Rights and
no
such claim has been asserted or threatened in writing. To the Knowledge of
the
Company, none of the company personnel has any ownership interest in any
patents
for any device, process, design or invention of any kind now used or needed
by
the Company in the furtherance of its business operations, which patents
have
not been assigned to the Company, with such assignment duly filed in the
United
States Patent and Trademark Office (“PTO”)
for
recordation. All company personnel who have contributed to or participated
in
the conception and development of any Company Intellectual Property Rights
owned
by the Company, and/or any other Intellectual Property conceived and/or reduced
to practice in the course of such company personnel’s employment at the Company,
either (i) have been party to a “work-for-hire” arrangement or agreement with
the Company, whether in accordance with applicable federal and state law,
domestic or foreign, or otherwise, that has accorded the Company ownership
of
all tangible and intangible property rights thereby arising, or (ii) have
executed appropriate instruments of assignment to the Company as assignee
that
have conveyed to the Company ownership of all tangible and intangible property
thereby arising.
3.25. No
Brokers.
Except
as set forth in Section 3.25 of the Company’s Disclosure Schedule, the Company
has not employed or incurred any Liability to any broker, finder, investment
banker or other agent in connection with the transactions contemplated by
this
Agreement.
3.26. Computer
Systems.
For
purposes of this Agreement, “Computer
Systems”
means
the software, hardware, network and telecommunications equipment and
Internet-related information technology that are material to the Company
in
connection with the operation of its business as currently conducted. The
Company is the owner of or is validly licensed to use or, in the case of
outsourced services, is entitled to receive the benefits of use of, the Computer
Systems, and will continue to be the owner of or, subject to obtaining any
Approval listed in Section 3.5 of the Company’s Disclosure Schedule, to be so
validly licensed or entitled to receive the benefits of use immediately
following the Closing Date. There have been no downtimes, security breaches,
virus attacks, hacking incidents, junk e-mail attacks, or system crashes
of the
Computer Systems in the 12 months prior to the date of this Agreement that
have
had, or would reasonably be expected to have, a Company Material Adverse
Effect.
The Computer Systems have sufficient capacity to meet the needs of the business
of the Company as currently conducted and as currently proposed to be
conducted.
34
3.27. Registration
Statement; Proxy Statement/Prospectus.
The
information to be supplied by the Company in writing for inclusion in the
S-4
shall not at the time the S-4 is filed with the SEC and at the time it becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading. The
information to be supplied by the Company for inclusion in the Proxy Statement
to be sent in connection with the meeting of Parent’s stockholders to consider
the approval of this Agreement and the issuance of shares of Parent Common
Stock
pursuant to the terms of the Merger (the “Parent
Stockholders’ Meeting”)
shall
not, on the date the Proxy Statement is first mailed to Parent’s stockholders,
and at the time of the Parent Stockholders’ Meeting, contain any untrue
statement of a material fact or omit to state any material fact required
to be
stated therein or necessary in order to make the statements therein, in light
of
the circumstances under which they are made, not false or misleading; or
omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the Parent
Stockholders’ Meeting which has become false or misleading. If at any time prior
to the Effective Time, any event relating to the Company or any of its
affiliates, officers or directors should be discovered by the Company which
should be set forth in an amendment to the S-4 or a supplement to the Proxy
Statement, the Company shall promptly inform Parent. Notwithstanding the
foregoing, the Company makes no representation or warranty with respect to
any
information which is contained in any of the foregoing documents which is
not
supplied by the Company in writing.
3.28. FDA
and Related Matters.
(a) The
Company has all licenses, permits, consents, approvals, authorizations,
registrations, qualifications and certifications or other action of, or any
filing, registration or qualification required by, the United States Food
and
Drug Administration (the “FDA”)
and
comparable foreign regulatory and governmental entities (collectively,
“FDA
Permits”),
as
are necessary under applicable law to own or lease its property and conduct
its
business as currently conducted, except for any of the foregoing that could
not,
in the aggregate, reasonably be expected to have a Company Material Adverse
Effect; the Company has satisfied all of the requirements of and fulfilled
and
performed all of its obligations with respect to the FDA Permits, and, to
the
Company’s knowledge, no event has occurred that allows, or after notice or lapse
of time would allow, revocation or termination thereof or results in any
other
impairment of the rights of the holder or any such FDA Permits, except for
any
of the foregoing that could not reasonably be expected to have a Company
Material Adverse Effect.
35
(b) Except
as
disclosed in Section 3.28 of the Company’s Disclosure Schedule or as otherwise
could not, in the aggregate, reasonably be expected to have a Company Material
Adverse Effect, (i) the Company has not failed to submit to the FDA an
Investigational New Drug Application for each clinical trial it is conducting
or
sponsoring within the United States and (ii) all such submissions were in
material compliance with applicable laws when submitted and no material
deficiencies have been asserted by the FDA with respect to any such
submissions.
(c) The
tests, nonclinical studies and clinical trials conducted by or on behalf
of the
Company were, and if still pending, are being conducted in all material respects
in accordance with applicable regulations, guidelines and generally accepted
standards of good clinical practice, experimental protocols, requirements
of a
duly-constituted institutional review board (“IRB”)
or
animal care and use committee as appropriate, procedures and controls pursuant
to, where applicable, accepted professional and scientific standards for
products or product candidates comparable to those being developed by the
Company. The Company has not received any notices or correspondence from
the FDA
or any foreign, state or local governmental body exercising comparable authority
or any IRB or comparable authority requiring the termination, suspension
or
material modification of any tests, studies or trials conducted by or on
behalf
of the Company which termination, suspension or material modification would
reasonably be expected to have a Company Material Adverse Effect.
(d) The
Company (i) is not and has not been debarred from participation in any program
related to pharmaceutical products pursuant to 21 U.S.C. Section 335a (a)
or (b)
(“Debarred”),
(ii)
does not employ or use the services of any person or entity that is Debarred
and
(iii) to the knowledge of the Company, has not employed or used the services
of
any person or entity that is or, during the time when such person or entity
was
employed by or providing services to the Company, was Debarred, except in
the
case of this clause (iii) as would not reasonably be expected to have a Company
Material Adverse Effect. The Company does not employ or use the services
of and,
to the Company’s Knowledge, has not employed or used the services of, any
investigator who has been disqualified under 21 C.F.R. Section 312.70.
(e) The
Company has provided to Parent with true, correct and complete copies of
each
annual report filed by the Company with the FDA and any similar state or
foreign
regulatory or governmental entity with respect to any products and product
candidates of the Company.
(f) The
Company has provided Parent with (i) true, correct and complete copies of
each
New Drug Application (“NDA”)
and
each Investigational New Drug application (“IND”),
and
each similar state or foreign regulatory filing made on behalf of any of
the
Company, including all supplements and amendments thereto, (ii) all
correspondence sent to and received from the FDA and similar state and foreign
Governmental Authorities that concerns or would reasonably be expected to
impact
a product or product candidate of the Company, and (iii) all existing written
records relating to all material discussions and all meetings between the
Company and the FDA or similar foreign regulatory or governmental entities.
36
3.29. Relationships
with Customers, Suppliers and Research Collaborators.
The
Company has no customers. Section 3.29 of the Company’s Disclosure Schedule sets
forth a list of the Company’s top 5 suppliers, in each case by dollar amount
paid to or by the Company, as applicable, for the fiscal year ended December
31,
2007. To the Company’s Knowledge, no such customer or supplier has expressed to
the Company any intention to cancel or otherwise terminate or materially
reduce
or modify its relationship with the Company. To the Company’s Knowledge, no
research collaborator of the Company has expressed to the Company an intention
to cancel or otherwise terminate or materially reduce or modify its relationship
with the Company.
3.30. Powers
of Attorney.
There
are no outstanding powers of attorney executed on behalf of the
Company.
3.31. Representations
and Warranties Complete.
The
representations and warranties of the Company included in this Agreement
and any
list, statement, document or information set forth in, or attached to, any
Section of the Company’s Disclosure Schedule provided pursuant to this Agreement
or delivered hereunder, are true and complete in all material respects and
do
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements contained
therein not misleading, in each case, under the circumstances under which
they
are being made.
ARTICLE
IV
Except
as
disclosed by Parent and Acquisition Sub in the disclosure schedule, dated
as of
the date of this Agreement and delivered by Parent and Acquisition Sub to
the
Company together with this Agreement (“Parent’s
Disclosure Schedule”),
Parent and Acquisition Sub hereby jointly and severally represent and warrant
to
the Company as follows:
(a) Parent
is
a corporation duly organized, validly existing and in good standing under
the
DGCL, and is qualified or licensed as a foreign corporation to do business,
and
is in good standing, in California, which jurisdiction is the only jurisdiction
where the character of the properties owned, leased or operated by it or
the
nature of its activities makes such qualification or licensing necessary,
except
for those jurisdictions where the failure to be so qualified, licensed or
in
good standing would not have a Parent Material Adverse Effect. Parent has
the
corporate power and authority, and is in possession of all Approvals necessary,
to own, lease and operate its properties and to carry on its business as
it is
now being conducted or as currently proposed to be conducted, other than
those,
the failure of which to possess would not have a Parent Material Adverse
Effect.
True, correct and complete copies of Parent’s Certificate of Incorporation and
By-Laws, and all amendments thereto and restatements thereof, are included
in
Parent’s SEC Documents or have been made available to the Company. Such
Certificate of Incorporation and By-Laws are in full force and effect.
(b) Acquisition
Sub is newly organized corporation, validly existing and in good standing
under
the DGCL. Parent has previously made available to the Company true, correct
and
complete copies of Acquisition Sub’s Certificate of Incorporation and By-Laws,
and all amendments thereto and restatements thereof. Such Certificate of
Incorporation and By-Laws are in full force and effect.
37
4.2. Subsidiaries.
Except
for Acquisition Sub, which is a wholly-owned subsidiary of Parent, neither
Parent nor Acquisition Sub owns, directly or indirectly, any equity,
partnership, membership or similar interest in, or any interest convertible
into
or exchangeable or exercisable for, any equity, partnership, membership or
similar interest in, any Person, nor is Parent or Acquisition Sub under any
obligation to form or participate in, provide funds to, or make any loan,
capital contribution or other investment in, any Person except as contemplated
by this Agreement. All of the outstanding capital stock of Acquisition Sub
is
owned by Parent, free and clear of any Liens other than Permitted Liens.
Acquisition Sub was formed solely for the purpose of engaging in a Business
Combination transaction with the Company and has engaged in no other business
activities and has conducted its operations solely as contemplated hereby.
Except as contemplated by this Agreement, no Person has any right to acquire
any
interest in the business or assets of Acquisition Sub (including any right
of
first refusal or similar right).
(a) Each
of
Parent and Acquisition Sub has all necessary corporate power and authority
to
execute and deliver this Agreement, and each Related Agreement to which it
is a
party, and each other instrument or document required to be executed and
delivered by it pursuant to this Agreement or any such Related Agreement,
and to
perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. Subject to Parent Stockholder
Approval, the execution and delivery by Parent and Acquisition Sub of this
Agreement and each Related Agreement to which it is a party, the performance
of
its obligations hereunder and thereunder, and the consummation by Parent
and
Acquisition Sub of the transactions contemplated hereby and thereby, have
been
duly and validly authorized by all corporate action on the part of Parent
and
Acquisition Sub (other than receipt of Parent Stockholder Approval) and no
other
corporate proceedings on the part of Parent or Acquisition Sub are necessary
to
authorize this Agreement or any Related Agreement to which it is a party
or to
consummate the transactions so contemplated hereby and thereby.
(b) This
Agreement has been, and each of the Related Agreements to which Parent or
Acquisition Sub is a party, when executed and delivered by Parent or Acquisition
Sub (and assuming the due authorization, execution and delivery by the other
parties hereto and thereto), will be, duly and validly executed and delivered
by
such party, and this Agreement constitutes, and each Related Agreement to
which
Parent or Acquisition Sub is a party, when executed and delivered, will
constitute, a legal, valid and binding obligation of Parent and/or Acquisition
Sub enforceable against such party in accordance with its terms, subject
to
applicable bankruptcy, insolvency, reorganization, moratorium and similar
laws
affecting creditors’ rights and remedies generally, and subject, as to
enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity).
38
4.4. Capitalization.
(a) The
authorized capital of Parent consists of (i) 60,000,000 shares of common
stock,
par value $0.0001 per share (“Parent
Common Stock”),
and
(ii) 1,000,000 shares of preferred stock, par value $0.0001 per share
(“Parent
Preferred Stock”),
of
which none have been designated. As of the date of this Agreement, there
are (i)
10,500,000 shares of Parent Common Stock issued and outstanding; (ii) no
shares
of Parent Preferred Stock issued and outstanding; (iii) 10,425,000 shares
of
Parent Common Stock reserved for issuance pursuant to outstanding warrants;
and
(iv) 900,000 shares of Parent Common Stock reserved for issuance pursuant
to the
outstanding Unit Purchase Option issued in connection with the Parent’s IPO. All
outstanding shares of capital stock of Parent are duly authorized, validly
issued, fully paid and non-assessable.
(b) Except
as
described in Section 4.4(a) above or disclosed in Parent’s SEC Documents, as of
the date hereof, there are no (i) outstanding securities, options (whether
vested or unvested), warrants, calls, rights, commitments or agreements to
which
Parent is a party or by which it is bound obligating Parent to issue, deliver
or
sell, or cause to be issued, delivered or sold, additional shares of capital
stock or other securities of Parent, (ii) outstanding obligations, contingent
or
otherwise, of Parent to repurchase, redeem or otherwise acquire any shares
of
capital stock (or options to acquire any such shares) or other securities
or
equity interests of Parent, (iii) outstanding stock appreciation rights,
phantom
stock or other equity equivalent or equity-based awards or rights to which
Parent is a party or by which it is bound, and Parent is not obligated to
grant
or issue any of the foregoing, (iv) voting trusts, proxies, rights plans,
anti-takeover plans or other agreements to which Parent is a party or by
which
it is bound with respect to the issuance, holding, acquisition, registration,
voting or disposition of any shares of capital stock or other securities
or
equity interests of Parent, and (v) declared or accrued unpaid dividends
with
respect to any of Parent’s securities and Parent has no obligation (contingent
or otherwise) to declare or pay any dividend with respect to any of its
securities or to make any other distribution in respect thereof.
(c) The
authorized capital stock of Acquisition Sub consists of 3,000 shares of common
stock, par value $0.0001 per share, 1,000 shares of which are duly authorized,
validly issued and outstanding, fully paid, non-assessable and owned by Parent
free and clear of all Liens other than Permitted Liens. Except as described
in
the foregoing sentence, as of the date hereof, there are no (i) outstanding
securities, options (whether vested or unvested), warrants, calls, rights,
commitments or agreements to which Parent is a party or by which it is bound
obligating Acquisition Sub to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or other securities
of
Acquisition Sub, (ii) outstanding obligations, contingent or otherwise, of
Acquisition Sub to repurchase, redeem or otherwise acquire any shares of
capital
stock (or options to acquire any such shares) or other securities or equity
interests of Acquisition Sub, (iii) outstanding stock appreciation rights,
phantom stock or other equity equivalent or equity-based awards or rights
to
which Acquisition Sub is a party or by which it is bound, and Acquisition
Sub is
not obligated to grant or issue any of the foregoing, (iv) voting trusts,
proxies, rights plans, anti-takeover plans or other agreements to which
Acquisition Sub is a party or by which it is bound with respect to the issuance,
holding, acquisition, registration, voting or disposition of any shares of
capital stock or other securities or equity interests of Acquisition Sub,
and
(v) declared or accrued unpaid dividends with respect to any of Acquisition
Sub’s securities and Acquisition Sub has no obligation (contingent or otherwise)
to declare or pay any dividend with respect to any of its securities or to
make
any other distribution in respect thereof.
39
(d) The
shares of Parent Common Stock to be issued by Parent as Merger Consideration
will, upon issuance in accordance with the terms of this Agreement, be duly
authorized, validly issued, fully-paid and non-assessable.
(e) None
of
the shares of capital stock of Parent or Acquisition Sub were issued or have
been transferred in violation of, or are subject to, any preemptive rights
or
rights of first offer.
4.5. Consents
and Approvals.
The
execution and delivery by each of Parent and Acquisition Sub of this Agreement,
the Related Agreements to which it is a party or any other instrument or
document required by this Agreement to be executed and delivered by Parent
or
Acquisition Sub do not, and the performance of this Agreement, the Related
Agreements to which it is a party and any other instrument or document required
by this Agreement to be executed and delivered by Parent or Acquisition Sub
shall not, require Parent or Acquisition Sub to obtain any Approval of any
Person or Approval of, observe any waiting period imposed by, or make any
filing
with or notification to, any Governmental Authority, except (a) for the filing
of the S-4 with the SEC in accordance with the Securities Act, (b) applicable
requirements, if any, of the Securities Act, the Exchange Act, Blue Sky Laws,
and the rules and regulations thereunder, (c) any request under the HSR Act
from
the United States Federal Trade Commission or the United States Department
of
Justice or any other Governmental Authority for additional information,
documents or other materials relating to the pre-merger notification
requirements of the HSR Act, (d) any notices required under the FD&C Act,
(e) the filing of the Certificate of Merger in accordance with the DGCL,
(f) as
set forth in Section 4.5 of Parent’s Disclosure Schedule, and (g) such other
Approvals, filings or authorizations as are not material.
4.6. No
Violation.
The
execution and delivery by Parent and Acquisition Sub of this Agreement and
each
Related Agreement to which Parent or Acquisition Sub is a party do not, and
the
performance by Parent and Acquisition Sub of its obligations under this
Agreement and each Related Agreement to which Parent or Acquisition is a
party,
will not (a) conflict with or violate the Certificate of Incorporation or
By-Laws, as amended to date, of Parent or Acquisition Sub, (b) conflict with
or
violate any Law or Order to which Parent or Acquisition Sub is subject or
by
which any of their respective properties are bound, or (c) conflict with
or
result in any breach or violation of or constitute a default (or an event
that
with notice or lapse of time or both would become a default) by Parent or
Acquisition Sub under any material Contract to which Parent or Acquisition
Sub
is a party or by which Parent or Acquisition Sub or any of their respective
assets or properties are bound or subject, which conflict, violation, breach
or
default would, in the case of subsections (b) and (c) hereof, have a Parent
Material Adverse Effect.
40
4.7. Required
Vote.
(a) Parent’s
Board of Directors, by the unanimous vote of all of the directors participating
at a meeting duly called and held (which directors constitute a majority
of the
directors then in office), has (i) approved and declared advisable this
Agreement and approved each Related Agreement to which Parent is a party,
(ii)
determined that the transactions contemplated hereby and thereby are advisable,
fair to and in the best interests of Parent’s stockholders, (iii) determined
that the fair market value of the Company is equal to at least 80% of Parent’s
net assets (excluding deferred underwriting discounts and commissions of
approximately $2,070,000), (iv) resolved to recommend adoption of this
Agreement, and the approval of the Merger, the Related Agreements to which
Parent is a party and the other transactions contemplated hereby and thereby
to
Parent’s stockholders, and (v) directed that this Agreement be submitted to
Parent’s stockholders for their adoption.
(b) The
affirmative vote of at least a majority of all outstanding shares of Parent
Common Stock present in person or by proxy at a special meeting of Parent’s
stockholders at which a quorum is present are the only votes of the holders
of
any class or series of capital stock of Parent necessary to adopt this
Agreement, and to approve the Merger, the Related Agreements to which Parent
is
a party and the other transactions contemplated hereby and thereby
(“Parent
Stockholder Approval”).
(c) Acquisition
Sub’s Board of Directors and Parent, as Acquisition Sub’s sole stockholder, have
jointly approved the Merger and adopted this Agreement and each Related
Agreement to which Acquisition Sub is a party and the other transactions
contemplated hereby and thereby.
4.8. Title
to Properties and Assets.
Except
as disclosed in Parent’s SEC Documents, (a) Parent does not own or lease any
real or personal property, and (b) except for this Agreement and the Related
Agreements to which Parent is a party, there are no Contracts under which
Parent
and has any right or obligation to acquire or lease any interest in real
or
personal property.
4.9. SEC
Documents.
(a) All
required reports, prospectuses, forms, schedules, proxy statements or
registration statements filed by Parent since its inception are collectively
referred to herein as “Parent’s
SEC Documents”.
Acquisition Sub is not required to file any report, prospectus, form, schedule,
proxy statement or registration statement with the SEC or any national
securities exchange or quotation service.
(b) All
Parent’s SEC Documents, as of their respective filing dates (with respect to
filings made under the Exchange Act) or as of the respective dates upon which
such filings became effective (with respect to filings made under the Securities
Act), complied as to form in all material respects with the applicable
requirements of the Securities Act, the Exchange Act and the rules and
regulations promulgated thereunder.
(c) None
of
Parent’s SEC Documents, as of their respective filing dates (with respect to
filings made under the Exchange Act) or as of the respective dates upon which
such filing became effective (with respect to filings made under the Securities
Act), contained any untrue statement of a material fact or omitted to state
any
material fact required to be stated therein or necessary in order to make
the
statements therein, in the light of the circumstances under which they were
made, not misleading.
41
(a) The
unaudited balance sheet of Parent as of September 30, 2007, and the related
unaudited statements of income, cash flow and stockholders’ equity for the
nine-month period then ended, as included in Parent’s SEC Documents, fairly
present in all material respects the financial condition of Parent as of
the
dates indicated, and the results of operations and cash flows of the Parent
for
the respective periods indicated, in accordance with GAAP, applied on a
consistent basis throughout the periods indicated (unless otherwise required
by
GAAP), except that such financial statements are subject to customary
inter-period and year-end adjustments and do not contain all footnotes required
by GAAP.
(b) Except
for liabilities identified as such in Parent’s above-referenced financial
statements (including the footnotes thereto) Parent has no accrued, contingent
or other Liabilities of any nature, either matured or unmatured and whether
due
or to become due of a type required to be reflected in financial statements
prepared in accordance with GAAP, or, to Parent’s Knowledge, of a type not
required by GAAP to be reflected in financial statements, other than (i)
liabilities or obligations incurred since September 30, 2007 in connection
with
identifying potential Business Combinations, performing due diligence with
respect to potential acquisition targets and otherwise in the ordinary course
of
business, (ii) Transaction Expenses, (iii) Permitted Parent Indebtedness,
and
(iv) recurring liabilities for accounting, legal and certain administrative
services.
(c) Acquisition
Sub has no assets or properties of any kind, does not now conduct and has
never
conducted any business, and has and will have at the Closing no obligations
or
liabilities of any nature whatsoever except such obligations and liabilities
as
are imposed under this Agreement.
4.11. Absence
of Certain Events.
Except
as set forth in Parent’s SEC Documents, and contemplated by this Agreement and
the Related Agreements, since September 30, 2007 there has not been, (a)
any
Parent Material Adverse Effect (b) any declaration, setting aside or payment
of
any dividend on, or other distribution (whether in cash, stock or property)
in
respect of, any of Parent’s capital stock, or any purchase, redemption or other
acquisition by Parent of any of Parent’s capital stock or any other securities
of Parent or any options, warrants, calls or rights to acquire any such shares
or other securities, (c) any split, combination or reclassification of any
of
Parent’s capital stock, (d) any granting by Parent of any increase in
compensation or fringe benefits, except for normal increases of cash
compensation in the ordinary course of business consistent with past practice,
or any payment by Parent of any bonus, except for bonuses made in the ordinary
course of business consistent with past practice, or any granting by Parent
of
any increase in severance or termination pay or any entry by Parent into
any
currently effective employment, severance, termination or indemnification
agreement or any agreement the benefits of which are contingent or the terms
of
which are materially altered upon the occurrence of a transaction involving
Parent of the nature contemplated hereby, (e) entry by Parent into any licensing
or other agreement with regard to the acquisition or disposition of any
Intellectual Property other than licenses in the ordinary course of business
consistent with past practice or any amendment or consent with respect to
any
licensing agreement filed or required to be filed by Parent with respect
to any
Governmental Entity, (f) any material change by Parent in its accounting
methods, principles or practices, except as required by GAAP or applicable
Law,
(g) any change in the auditors of Parent, (h) except for securities which
may be
issued in connection with the incurrence of Permitted Parent Indebtedness,
any
issuance of capital stock of Parent, or (i) any revaluation by Parent of
any of
its assets, including, without limitation, writing down the value of capitalized
inventory or writing off notes or accounts receivable or any sale of assets
of
Parent other than in the ordinary course of business.
42
4.12. Restrictions
on Business Activities.
Since
its organization, Parent has not conducted any business activities other
than
activities directed toward Parent’s IPO and the consummation of a Business
Combination. Except as set forth in Parent’s Certificate of Incorporation,
Parent’s SEC Documents or Parent Contracts, there is no agreement, commitment,
judgment, injunction, order or decree binding upon Parent or to which Parent
is
a party which has or could reasonably be expected to have the effect of
prohibiting or materially impairing any business practice of Parent, any
acquisition of property by Parent or the conduct of business by Parent as
currently conducted other than such effects, individually or in the aggregate,
which have not had and could not reasonably be expected to have, a Parent
Material Adverse Effect.
4.13. Legal
Proceedings; Orders.
There
is no Action pending or, to Parent’s Knowledge, threatened by or against Parent,
Acquisition Sub or relating to Parent, Acquisition Sub or their respective
businesses or properties, except for the foregoing that could not reasonably
be
expected to have a Parent Material Adverse Effect, and no officer or director
of
Parent or Acquisition Sub is a defendant in any Action in connection with
his or
her status as such. None of Parent, Acquisition Sub or any of Parent’s or
Acquisition Sub’s material properties or assets is subject to any outstanding
Order.
4.14. Compliance
with Laws.
Except
as set forth in Section 4.14 of Parent’s Disclosure Schedule, each of Parent and
Acquisition Sub is, and at all times has been, in compliance in all material
respects with all Laws applicable to it or its assets or properties. Neither
Parent nor Acquisition Sub has received any notice to the effect that it
is not
in compliance with any Laws and there is no Action pending or to the Parent’s
Knowledge, threatened by any Governmental Authority with respect to any alleged
violation by Parent or Acquisition Sub of any applicable Law.
4.15. Employment
and Labor Matters; Employee Benefit Plans.
Neither
Parent nor Acquisition Sub have any current or former employees. Except as
disclosed in Parent’s SEC Documents, neither Parent nor Acquisition Sub maintain
any “employee benefit plan,” as such term is defined in Section 3(3) of ERISA,
or other material benefit plan, arrangement, agreement, policy or understanding
(whether written or oral) sponsored, maintained or contributed to by Parent
or
Acquisition Sub or under which Parent or Acquisition Sub has any
liability.
4.16. Contracts.
(a) Included
in or filed as exhibits to Parent’s SEC Documents are descriptions or copies of
any “material contract” (as such term is defined in Item 601(b)(10) of
Regulation S-K of the SEC) to which Parent is a party or is otherwise bound
or
by which any assets or properties of Parent is subject. Except as set forth
in
the Parent SEC Documents filed prior to the date of this Agreement, there
are no
contracts, agreements, leases, mortgages, indentures, notes, bonds, liens,
license, permit, franchise, purchase orders, sales orders or other
understandings, commitments or obligations (including without limitation
outstanding offers or proposals) of any kind, whether written or oral, to
which
Parent is a party or by or to which any of the properties or assets of Parent
may be bound, subject or affected, which either (i) creates or imposes a
liability greater than $350,000, or (ii) may not be cancelled by Parent on
less
than 30 days’ or less prior notice (“Parent
Contracts”).
All
Parent Contracts other than those that are exhibits to the Parent SEC Reports
are listed in Section 4.16 of Parent’s Disclosure Schedule. True, correct and
complete copies of all Parent Contracts listed in Section 4.16 of Parent’s
Disclosure Schedule have been made available to the Company. Parent is not,
nor
has it at any time been, in material default under the terms of any Parent
Contract (other than defaults that have been cured or waived and for which
Parent has no continuing Liability), and Parent has not received any written
notice of any material default under the terms of any Parent Contract. To
Parent’s Knowledge, no other party to any Parent Contract is, or is alleged to
be, in default under the terms thereof. To Parent’s Knowledge, no event has
occurred, and no circumstance or condition exists, that (with or without
notice
or lapse of time) will, or could reasonably be expected to, (A) result in
a
violation or breach of any of the provisions of any Parent Contract, (B)
give
any Person the right to declare a default or exercise any remedy under any
Parent Contract, (C) give any Person the right to accelerate the maturity
or
performance of any Parent Contract, or (D) give any Person the right to cancel,
terminate or modify any Parent Contract.
43
(b) The
Parent Contracts are in full force and effect and are valid and binding
obligations of Parent and, to Parent’s Knowledge, the other parties thereto,
except that enforcement thereof may be limited by bankruptcy, insolvency
or
similar laws affecting the enforcement of creditor’s rights in effect from time
to time and general principles of equity. Parent has not received any notice
from any other party to a Parent Contract of the termination or threatened
termination thereof, or of any claim, dispute or controversy with respect
thereto.
(c) Acquisition
Sub is not a party or subject to any Contract other than this Agreement and
the
Related Agreements to which it is a party and as otherwise contemplated hereby
and thereby.
4.17. Transactions
With Related Parties.
Except
as disclosed in Parent’s SEC Documents or in Section 4.17 of Parent’s Disclosure
Schedule, no Related Party is currently (a) a party to any transaction with
Parent, (b) to Parent’s Knowledge, the direct or indirect owner of a material
interest in any Person which is a competitor, supplier or customer of Parent,
(c) the direct or indirect owner of any property or assets used in the business
of the Parent, (d) has any outstanding Indebtedness payable to Parent and
Parent
has not guaranteed any obligation or Indebtedness of any such Related Party
to a
third party, or (e) to Parent’s Knowledge, has any direct or indirect ownership
interest in any Person that competes with Parent (except for direct or indirect
ownership of capital stock of one or more publicly traded companies in an
amount
less than 5% of such public company’s outstanding capital stock).
44
4.18. Indebtedness.
Parent
has no indebtedness for borrowed money other than Permitted Parent Indebtedness,
if any.
4.19. Insurance.
Except
for directors’ and officers’ liability insurance, Parent does not maintain any
insurance policies.
4.20. AMEX.
Parent
Common Stock is listed on the American Stock Exchange (the “AMEX”).
There
is no Action pending or to the Parent’s Knowledge, threatened against Parent by
AMEX or the Financial Industry Regulatory Authority with respect to any
intention to delist Parent Common Stock from the AMEX.
4.21. Trust
Account.
As of
January 31, 2008, there was approximately $67,825,900
held in
the Trust Account.
4.22. Ownership
of Company Stock.
Neither
Parent nor Acquisition Sub beneficially owns, directly or indirectly, any
shares
of Company Stock or is a party to any agreement, arrangement or understanding
(other than this Agreement) for the purpose of acquiring, holding, voting
or
disposing of any shares of Company Stock.
4.23. No
Brokers.
Except
as disclosed on Schedule 4.23 of Parent’s Disclosure Schedule, neither Parent
nor Acquisition Sub has employed or incurred any Liability to any broker,
finder, investment banker or other agent in connection with the transactions
contemplated by this Agreement.
4.24. Representations
and Warranties Complete.
The
representations and warranties of Parent included in this Agreement are true
and
complete in all material respects and do not contain any untrue statement
of a
material fact or omit to state a material fact required to be stated therein
or
necessary to make the statements contained therein not misleading, in each
case,
under the circumstances under which they are being made.
45
ARTICLE
V
5.1. Conduct
Pending Closing.
(a) During
the period from the date of this Agreement and continuing until the earlier
of
the termination of this Agreement pursuant to its terms and the Closing,
the
Company, on the one hand, and Parent and Acquisition Sub, on the other hand,
shall use its commercially reasonable efforts consistent with past practices
and
policies, (a) conduct its business in all material respects the ordinary
course
of business consistent with past practice, (b) maintain its corporate existence,
preserve intact its business organization and assets, (c) keep available
the
services of its present officers, key employees, (d) maintain in effect the
Company Contracts and Parent Contracts, as applicable (subject to the expiration
of any such Contract pursuant to its terms), and (e) preserve present business
relationships with suppliers, customers, licensees and other Persons.
(b) Between
the date hereof and the Effective Time, none of the Company, Parent or
Acquisition Sub shall do, or agree to do, any of the following without the
prior
written consent of the other:
(i) sell,
assign, license or otherwise dispose of any material portion of its assets
or
properties, except in the ordinary course of business, consistent with past
practice in nature and amount, and in an aggregate amount not to exceed
$1,500,000;
(ii) terminate
(except for those that terminate in accordance with their terms), modify
or
amend any Contract except in the ordinary course of business, consistent
with
past practice which termination, modification or amendment involves aggregate
payments or value in excess of $500,000;
(iii) change
auditors, accounting principles, policies, procedures, practices or methods,
other than as required by GAAP or by applicable Law;
(iv) with
respect to the Company, amend any Company Plan;
(v) pay
any
bonus, profit sharing or similar payment to, or increase the amount of the
wages, salary, commissions, fringe benefits or other compensation or
remuneration payable to, any directors, officers or employees other than
once-annual increases in the ordinary course of business, consistent with
past
practice in nature and amount, which increases, in the aggregate shall not
exceed $350,000;
(vi) grant
or
increase severance or termination pay or change of control payment except
in the
ordinary course of business, consistent with past practice which grant or
increase payment involves, in any one case, aggregate payments in excess
of
$75,000;
(vii) enter
into any employment, severance, termination or indemnification agreement
or any
agreement the benefits of which are contingent or the terms of which are
materially altered upon the occurrence of a transaction of the nature
contemplated hereby;
46
(viii) cancel
or
forfeit any material debts or claims or any waive of any rights of material
value;
(ix) incur,
assume or guarantee any Indebtedness for borrowed money other than in the
ordinary course of business consistent with past practice in nature and amount,
and in an aggregate amount not to exceed $1,000,000 (including any Indebtedness
existing as of the date of this Agreement);
(x) loan,
advance or make capital contribution to, or investment in, any Person other
than
loans or advances to employees in connection with business-related travel
and
entertainment, in each case made in the ordinary course of business consistent
with past practice in nature and amount;
(xi) declare,
set aside or pay any dividend on, or other distribution (whether in cash,
stock
or property) in respect of, any of class or series of capital stock, or
purchase, redeem or otherwise acquire any shares of capital stock or any
other
securities or any options, warrants, calls or rights to acquire any such
shares
or other securities;
(xii) make
any
capital expenditure which exceeds $100,000 or, when added to all other capital
expenditures made following the date of this Agreement, exceeds $250,000;
(xiii) reevaluate
any assets, including, without limitation, writing down the value of capitalized
inventory or writing off notes or accounts receivable;
(xiv) amend
or
otherwise change its Certificate of Incorporation or By-Laws or alter through
merger, liquidation, reorganization, restructuring or in any other fashion
its
corporate structure;
(xv) issue,
sell, transfer, pledge, dispose of or encumber, or subject to a Lien, or
authorize the issuance, sale, transfer, pledge, disposition or encumbrance
of,
any shares of its capital stock or other equity of any class, or any options,
warrants, convertible securities or other rights of any kind to acquire any
shares of capital stock, or any other ownership interest, except, (A) in
the
case of the Company, for the issuance of shares of Company Common Stock upon
the
exercise of Company Options outstanding on the date hereof, securities issued
in
connection with a Bridge Financing, and securities issued to Arachnova
Therapeutics Limited (“Arachnova”)
pursuant to an agreement between Arachnova and the Company, dated as of December
10, 2007, and (B) in the case of Parent, as may be agreed to by Parent’s Board
of Directors, subject to the Company’s consent (which consent shall not be
unreasonably withheld or delayed);
(xvi) sell,
transfer, pledge, dispose of or encumber, or authorize the sale, transfer,
pledge, disposition or encumbrance of a material amount of its assets; or
redeem, purchase or otherwise acquire, directly or indirectly, any of the
capital stock of any class, or any options, warrants, convertible securities
or
other rights of any kind to acquire any shares of capital stock, or any other
ownership interest;
47
(xvii) declare,
set aside or pay any dividend or other distribution (whether in cash, stock
or
other securities or property or any combination thereof) in respect of any
of
its capital stock or other equity interests;
(xviii) split,
combine or reclassify any of its capital stock or other securities or issue
or
authorize or propose the issuance of any other stock options or securities
in
respect of, in lieu of or in substitution for shares of its capital stock
or
amend the terms of, repurchase, redeem or otherwise acquire, any of its
securities, or propose to do any of the foregoing;
(xix) adopt
a
plan of complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization (other than the
Merger);
(xx) form
any
subsidiary or acquire (by merger, consolidation, acquisition of stock or
other
securities or assets or otherwise) any equity or other interest, or make
any
other investment in, any other Person or acquire any material amount of assets
or property other than in the ordinary course of business, or enter into
any
joint venture, strategic alliance, exclusive dealing, non-competition or
similar
contract or arrangement with any other Person;
(xxi) hire
or
terminate any key employee, consultant or independent contractor, except
for
hirings in the ordinary course of business consistent with past practice
and
terminations for poor performance or cause;
(xxii) accelerate
the collection of or discount any accounts receivable, delay the payment
of
accounts payable or defer expenses or reduce inventories, except in the ordinary
course of business consistent with past practice;
(xxiii) create,
incur, suffer to exist or assume any Lien (other than Liens existing on the
date
hereof and Permitted Liens) on any of its assets or properties;
(xxiv) enter
into any Contract involving aggregate payments or a value in excess of $350,000,
other than in the ordinary course of business or for Transaction Expenses;
(xxv) settle
or
compromise any federal, state, local or foreign income Tax Liability or agree
to
an extension of a statute of limitations;
(xxvi) pay,
discharge, satisfy, settle or commence any Action or waive, assign or release
any material rights or claims;
(xxvii) make
or
change any election, change any annual accounting period, file any amended
Return, in each case, with respect to Taxes;
(xxviii) engage
in
any action that could reasonably be expected to cause the Merger to fail
to
qualify as a “reorganization” under Section 368(a) of the Code;
(xxix) make
any
stock split or consolidation; or
48
(xxx) authorize,
recommend, propose or announce an intention to do any of the foregoing, or
agree
or enter into any Contract to do any of the foregoing;
provided,
that, none of the Approved Secured Debt, the Bridge Financing or the Permitted
Parent Indebtedness (including securities issued in connection with the
incurrence of Permitted Parent Indebtedness) shall be deemed precluded by
the
foregoing clauses (i) through (xxx) of this Section 5.1(b).
(c) The
Company will obtain the Bridge Financing in an amount required in excess
of the
Secured Debt to operate the Company from the date hereof to the Closing Date
up
to $5,000,000 (the “Commitment”).
In
the event that the Closing Date occurs before the Commitment is fully funded,
there will be no obligations to obtain the full amount of the Commitment.
(a) As
promptly as practicable after the execution of this Agreement and, in any
event,
within four Business Days thereof, (i) Parent and the Company shall prepare
and
issue a press release, and (ii) Parent will prepare and file with the SEC
a
current report on Form 8-K, in each case, announcing the execution of this
Agreement and the Merger contemplated hereunder.
(b) As
promptly as practicable after the execution of this Agreement and receipt
from
the Company of financial and other information relating to the Company as
Parent
may reasonably request for its preparation (i) the Parent will prepare and
file
with the SEC the Proxy Statement, and Parent will prepare and file with the
SEC
the S-4 in which the Proxy Statement will be included as a prospectus, and
(ii)
Parent will prepare and file any other filings required under the Exchange
Act,
the Securities Act or any other Federal, foreign or Blue Sky laws relating
to
the Merger and the transactions contemplated by this Agreement (collectively,
the “Other
Filings”).
For
inclusion in the S-4, each of Parent and the Company will cause its audited
financial statements for its fiscal year ended December 31, 2007 to be
completed, and appropriate consents of its auditors to be delivered, as soon
as
reasonably possible following the date of this Agreement.
(c) Parent
will notify the Company promptly upon the receipt of any comments from the
SEC
or its staff and of any request by the SEC or its staff or any other
governmental officials for amendments or supplements to the S-4, the Proxy
Statement or any Other Filing or for additional information and will supply
the
Company with copies of all correspondence between the Parent or any of its
representatives, on the one hand, and the SEC, or its staff or other government
officials, on the other hand, with respect to the S-4, the Proxy Statement,
the
Merger or any Other Filing. The Parent will respond to any comments of the
SEC
and will use its commercially reasonable efforts to have the S-4 declared
effective under the Securities Act as promptly as practicable after such
filing
and will cause the Proxy Statement to be mailed to Parent’s stockholders at the
earliest practicable time.
(d) The
Company will engage Ernst & Young LLP (“E&Y”), to issue to Parent a
“comfort” letter, in form and substance reasonably satisfactory to Parent,
concerning the financial statements of the Company and certain statistical
and
other data included in the S-4 and Proxy Statement, in accordance with Statement
of Auditing Standards No. 72 “Letters for Underwriters and Certain Other
Requesting Parties” (“SAS
72”)
and
E&Y’s normal practices and procedures, which “comfort” letter will be dated
at or about the effective date of the S-4 and prior to the Mailing Date (the
“Comfort
Letter”).
Parent and Company shall use their respective reasonable best efforts to
satisfy
the criteria of SAS 72 to enable E&Y to issue the comfort letter on a timely
basis (including, but not limited to, the requirement that Parent provide
certain customary representations in accordance with SAS 72).
49
(e) The
Proxy
Statement, the S-4 and the Other Filings will comply in all material respects
with all applicable requirements of law and the rules and regulations
promulgated thereunder. Whenever any event occurs which is required to be
set
forth in an amendment or supplement to the Proxy Statement, the S-4 or any
Other
Filing, the Parent, as the will promptly inform the Company of such occurrence
and each of the Company and the Parent will cooperate in filing with the
SEC or
its staff or any other government officials, and/or mailing to stockholders
of
the Company and Parent, such amendment or supplement.
(f) Proxy
materials, in the form of a proxy statement (as amended or supplemented,
the
“Proxy
Statement”),
will
be sent to the stockholders of Parent for the purpose of soliciting proxies
from
holders of Parent Common Stock to vote, at the Parent Stockholder’s Meeting, in
favor of:
(i) Parent
Stockholder Approval;
(ii) the
change of the name of Parent to “Dynogen Pharmaceuticals, Inc.”, an amendment to
remove the preamble and Sections A through F, inclusive, of Article Sixth
from
Parent’s Certificate of Incorporation from and after the Closing and to
redesignate section G of Article Sixth as Article Sixth, an increase in the
number of authorized shares of Parent Common Stock and such other changes
as
mutually agreed upon by Parent and Company (the “Charter
Amendment”);
(iii) the
election of Parent’s Designees, the Company’s Designees and Xxx X. Xxxxxxxx to
Parent’s Board of Directors, effective as of the Effective Time;
and
(iv) the
adoption of an equity incentive plan, in form and substance reasonably
satisfactory to Parent and the Company, providing for issuance thereunder
of up
to such number of shares of Parent Common Stock as shall equal 15% of (A)
the
issued and outstanding shares of Parent Common Stock immediately following
the
Closing Date, plus
(B)
the
shares of Parent Common Stock issuable upon the exercise of options, warrants
and other rights outstanding immediately following the Closing Date (but
not
including First Success Fee Shares or Second Success Fee Shares) (the
“Parent
Plan”).
(g) As
soon
as practicable following its approval by the SEC, Parent shall distribute
the
Proxy Statement to the holders of Parent Common Stock (the date of such
distribution, the “Mailing
Date”)
and,
pursuant thereto, shall call the Parent Stockholders Meeting in accordance
with
the DGCL and, subject to the other provisions of this Agreement, solicit
proxies
from such holders to vote in favor of the adoption of this Agreement and
the
approval of the Merger and the other matters presented to the stockholders
of
Parent for approval or adoption at the Parent Stockholders’ Meeting, including,
without limitation, the matters described in Section 6.2(d) above. Parent,
acting through its Board of Directors, shall include in the Proxy Statement
the
recommendation of its Board of Directors that the holders of Parent Common
Stock
vote in favor of the adoption of this Agreement and the approval of the Merger,
and shall otherwise use reasonable best efforts to obtain the Parent Stockholder
Approval.
50
(h) Parent
shall comply with all applicable provisions of and rules under the Exchange
Act
and all applicable provisions of the DGCL in the preparation, filing and
distribution of the Proxy Statement, the solicitation of proxies thereunder,
and
the calling and holding of the Parent Stockholders’ Meeting. The Company shall
coordinate with Parent to ensure that the information relating to the Company
supplied by the Company for inclusion in the Proxy Statement will not as
of date
of its distribution to the holders of Parent Common Stock (or any amendment
or
supplement thereto) or at the time of the Parent Stockholders’ Meeting contain
any statement which, at such time and in light of the circumstances under
which
it is made, is false or misleading with respect to any material fact, or
omits
to state any material fact required to be stated therein or necessary in
order
to make the statement therein not false or misleading.
(i) Prior
to
the Closing Date, Parent shall use its reasonable best efforts to cause the
shares of Parent Common Stock to be issued pursuant to the Merger to be
registered or qualified under all applicable Blue Sky Laws of each of the
states
and territories of the United States in which it is believed, based on
information furnished by the Company, holders of the Company Stock reside
and to
take any other such actions that may be necessary to enable the Parent Common
Stock to be issued pursuant to the Merger in each such
jurisdiction.
(j) At
least
five days prior to Closing, Parent shall prepare a draft Form 8-K announcing
the
Closing, together with, or incorporating by reference, the financial statements
prepared by the Company and its accountant, and such other information that
may
be required to be disclosed with respect to the Merger in any report or form
to
be filed with the SEC (“Merger
Form 8-K”),
which
shall be in a form reasonably acceptable to the Company and in a format
acceptable for XXXXX filing. Prior to Closing, Parent and the Company shall
prepare the press release announcing the consummation of the Merger hereunder
(“Press
Release”).
Simultaneously with the Closing, Parent shall file the Merger Form 8-K with
the
SEC and distribute the Press Release.
(k) In
connection with the preparation of the Merger Form 8-K and Press Release,
and
for such other reasonable purposes, the Company and Parent each shall, upon
request by the other, furnish the other with all information concerning
themselves, their respective directors, officers and stockholders (including
the
Initial Officers and Directors) and such other matters as may be reasonably
necessary or advisable in connection with the Merger, or any other statement,
filing, notice or application made by or on behalf of the Company and Parent
to
any third party and/or any Governmental Authority in connection with the
Merger
and the other transactions contemplated hereby. Each party warrants and
represents to the other party that all such information shall be true and
correct in all material respects and will not contain any untrue statement
of a
material fact or omit to state a material fact required to be stated therein
or
necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.
51
(a) Each
of
Parent, Acquisition Sub and the Company (i) agrees that it shall, as promptly
as
practicable and in any event within 21 calendar days of the date hereof,
make
the filings required of such party under the HSR Act with respect to the
transactions contemplated by this Agreement, (ii) agrees to use its reasonable
best efforts to negotiate with the United States Federal Trade Commission,
the
United States Department of Justice and/or any other Governmental Authority
in
respect of such filings to prevent the issuance of any requests for additional
information, documents or other materials under the HSR Act; provided, that,
(A)
if such a request is about to be issued notwithstanding the parties’ efforts,
the parties shall discuss the withdrawal and refiling of the filings to avoid
the issuance of such a request and to enable the parties to continue to attempt
to resolve the issues raised by the United States Federal Trade Commission,
the
United States Department of Justice and/or any other Governmental Authority
in
connection with the filings without the need to respond to any such request,
and
each of the parties shall have the option of withdrawal and refiling, and
(B) if
any such requests are nonetheless issued, to seek modification of same and/or
comply at the earliest practicable date with respect thereto, as modified,
and
(iii) shall act in good faith and reasonably cooperate with the other party
in
connection with any such filing and in connection with resolving any
investigation or other inquiry of any such agency or other Governmental
Authority under any Antitrust Laws with respect to any such filing or any
such
transaction. To the extent not prohibited by Law, each party to this Agreement
shall use reasonable best efforts to furnish to each other all information
required for any application or other filing to be made pursuant to any Law
in
connection with the transactions contemplated by this Agreement. Each of
the
Company and Parent shall give the other reasonable prior notice of any
communication with, and any proposed understanding, undertaking or agreement
with, any Governmental Authority regarding any such filings or any such
transaction. The Company and Acquisition Sub shall (x) give the other parties
hereto prior notice of each meeting and substantive conversation with the
United
States Federal Trade Commission, the United States Department of Justice
and/or
any other Governmental Authority with respect to such filings, investigation
or
other inquiry, (y) discuss with the other parties hereto the subject matter
to
be discussed at such meeting or during such conversation and the recommended
course of action, and (z) to the extent reasonably practicable or appropriate,
allow the other parties to participate in such meeting or
conversation.
(b) Each
of
Parent, Acquisition Sub and the Company shall use reasonable best efforts
to
resolve such objections, if any, as may be asserted by any Governmental
Authority with respect to the transactions contemplated by this Agreement,
under
the HSR Act, the Xxxxxxx Act, as amended, the Xxxxxxx Act, as amended, the
Federal Trade Commission Act, as amended, and any other Laws or Orders that
are
designed to prohibit, restrict or regulate actions having the purpose or
effect
of monopolization or restraint of trade (collectively, “Antitrust
Laws”).
In
connection therewith, if any Action is instituted (or threatened to be
instituted) challenging any transaction contemplated by this Agreement as
inconsistent with or in violation of any Antitrust Law, each of Parent,
Acquisition Sub and the Company shall cooperate and use reasonable best efforts
to contest and resist such Action, and to have vacated, lifted, reversed
or
overturned any Order whether temporary, preliminary or permanent, that is
in
effect and that prohibits, prevents, delays or restricts consummation of
the
transactions contemplated by this Agreement or the Related Agreements, including
by pursuing all available avenues of administrative and judicial appeal and
all
available legislative action, unless Parent and the Company determine that
litigation is not in their mutual best interests. Each of Parent, Acquisition
Sub and the Company shall use reasonable best efforts to take such action
as may
be required to cause the expiration of the notice periods under the HSR Act
or
other Antitrust Laws with respect to the transactions contemplated by this
Agreement and the Related Agreements as promptly as possible after the execution
of this Agreement.
52
(c) Each
of
Parent and the Company shall, as promptly as practicable, use reasonable
best
efforts to obtain all other necessary Approvals from Governmental Authorities
and make all other necessary registrations and filings under applicable Law
required in connection with the authorization, execution and delivery of
this
Agreement and the Related Agreements and the consummation of the transactions
contemplated hereby and thereby, including the Merger. Parent and the Company
shall act in good faith and reasonably cooperate with the other in connection
therewith and in connection with resolving any investigation or other inquiry
with respect thereto. To the extent not prohibited by Law, each party to
this
Agreement shall use reasonable best efforts to furnish to each other all
information required for any application or other filing to be made pursuant
to
any Law (other than Antitrust Laws) in connection with the transactions
contemplated by this Agreement and the Related Agreements. Each of the Company
and Parent shall give the other reasonable prior notice of any communication
with, and any proposed understanding, undertaking or agreement with, any
Governmental Authority regarding any such Approval. The Company, Parent and
Acquisition Sub shall (i) give the other parties hereto prior notice of each
meeting and substantive conversation with any Governmental Authority with
respect to any such Approval, investigation or other inquiry, (ii) discuss
with
the other parties hereto the subject matter to be discussed at such meeting
or
during such conversation and the recommended course of action, and (iii)
to the
extent reasonably practicable or appropriate, allow the other parties to
participate in such meeting or conversation.
5.4. Access
to Information.
Prior
to the Effective Time and upon reasonable notice, the Company shall afford
to
the Parent’s Representatives, reasonable access during normal working hours to
all of its properties, finances, operating condition, books, Contracts and
records and the Company shall furnish promptly to Parent all information
concerning its business, properties, books, Contracts, records and personnel
as
Parent or Parent’s Representatives may reasonably request. The Company shall
make available to Parent’s Representatives upon the reasonable request of Parent
and during normal working hours all officers, accountants, counsel and other
representatives or agents of the Company for discussion of the Company’s
businesses, properties or personnel as Parent may reasonably request. The
Company shall use reasonable best efforts to make available to the officers,
employees, accountants, counsel and other representatives of Parent upon
the
reasonable request of Parent such customers, suppliers or other Persons with
whom the Company maintains a business or commercial relationship; participating
in any telephone conversation. No information or knowledge obtained by Parent
in
any investigation pursuant to this Section 5.4 will affect or be deemed to
modify any representation or warranty contained herein or the conditions
to the
obligations of the parties to consummate the Merger. All information obtained
by
Parent pursuant to this Section 5.4 shall constitute Dynogen Information
(as
such term is defined in that certain Mutual Non-Disclosure Agreement and
Waiver,
dated August 14, 2007, between Parent and the Company (the “Confidentiality
Agreement”)).
The
Confidentiality Agreement and the terms and conditions thereof shall survive
execution and delivery of this Agreement and the Closing; provided, that
Parent,
Acquisition Sub and their respective Representatives may disclose Dynogen
Information, and the Company, the Representative and the Company’s
Representatives may disclose Apex Information (as such term is defined in
the
Confidentiality Agreement), in each case, to the limited extent necessary
to
preserve and enforce such Person’s rights under this Agreement and the Related
Agreements. Acquisition Sub and the Representative agree to be bound to the
terms and conditions of the Confidentiality Agreement as if a party thereto
to
the same extent as Apex and the Company, respectively.
53
5.5. Notice
of Certain Events.
Each
party hereto shall promptly notify the other parties hereto of any event,
condition, fact, circumstance, occurrence, transaction or other item of which
such party becomes aware after the date hereof and prior to the Closing that
would constitute a material violation or breach of this Agreement (or a material
breach of any representation or warranty contained herein) or, if the same
were
to continue to exist as of the Closing Date, would result in any of the
conditions set forth in Article VI hereof.
5.6. Public
Announcements; Non-Disclosure.
Subject
to Section 6.2 and 6.3 above, prior to the Effective Time, Parent and the
Company shall consult with and obtain the approval of (which approval shall
not
be unreasonably withheld) the other party before issuing any press release
or
other public announcement with respect to the Merger or this Agreement, and
no
party hereto shall issue or cause to be issued any such press release prior
to
such consultation and approval, except to the extent required by applicable
Law
or the rules of any applicable securities exchange, in which case the party
proposing to issue such press release or make such public announcement shall
use
its reasonable best efforts to consult in good faith with the other party
before
issuing any such press release or making any such public announcement to
attempt
to agree upon mutually satisfactory text.
5.7. Directors
and Officers of Parent and the Company After Merger.
Parent
and the Company shall take all necessary action so that the Initial Officers
and
Directors are elected to the positions of officers and directors of Parent
and
the Surviving Corporation, to serve in such positions effective immediately
after the Closing. The directors of the Company and the directors of Parent
shall enter into a voting agreement prior to Closing to give effect to the
foregoing.
(a) All
rights to indemnification for acts or omissions occurring through the Closing
Date now existing in favor of the current directors and officers of Parent
as
provided in its Certificate of Incorporation or By-Laws or in any
indemnification agreements shall survive the Merger and shall continue in
full
force and effect in accordance with their terms. Neither Parent nor the
Surviving Corporation will amend, repeal or modify such provisions in any
manner
that would adversely affect the rights thereunder of such persons; provided,
that such indemnification shall be subject to any limitation imposed from
time
to time under applicable Law.
54
(b) For
a
period of six years after the Closing Date, Parent shall cause to be maintained
in effect the current policies of directors’ and officers’ liability insurance
maintained by Parent (or policies of at least the same coverage and amounts
containing terms and conditions which are no less advantageous) with respect
to
claims arising from facts and events that occurred prior to the Closing
Date.
(c) If
Parent
or any of its successors or assigns (i) consolidates with or merges into
any
other Person and shall not be the continuing or surviving entity of such
consolidation or merger, or (ii) transfers or conveys all or substantially
all
of its properties and assets to any Person, then, in each such case, to the
extent necessary, proper provision shall be made so that the successors and
assigns of Parent assume the obligations set forth in this Section
5.8.
(d) The
provisions of this Section 5.8 are intended to be for the benefit of, and
shall
be enforceable by, each Person who will have been a director or officer of
Parent for all periods ending on or before the Closing Date and may not be
changed without the consent of a majority-in-number of such Persons.
5.9. Treatment
as a Reorganization.
Neither
Parent nor the Company shall take any action prior to or following the Merger
that could reasonably be expected to cause the Merger to fail to qualify
as a
“reorganization” within the meaning of Section 368(a) of the Code.
5.10. No
Securities Transactions.
The
Company nor any of its affiliates, directly or indirectly, shall engage in
any
transactions involving the securities of Parent prior to the time of the
making
of a public announcement of the transactions contemplated by this Agreement.
The
Company shall use its best efforts to require each of its officers, directors,
employees, agents and representatives to comply with the foregoing
requirement.
5.11. No
Claim Against Trust Account.
The
Company acknowledges that, if the transactions contemplated by this Agreement
are not consummated by Parent by June 13, 2009, Parent will be obligated
to
return to its stockholders the amounts being held in the Trust Account.
Accordingly, the Company s hereby waives all rights against Parent to collect
from or assert a claim against the Trust Account for any moneys that may
be owed
to it by Parent for any reason whatsoever, including but not limited to a
breach
of this Agreement by Parent or any negotiations, agreements or understandings
with Parent (other than as a result of the Merger, pursuant to which the
Company
would have the right to collect the monies in the Trust Account), and will
not
seek recourse against the Trust Account for any reason whatsoever.
5.12. Updates
to Disclosure Schedule for Post-Signing Events.
At any
time, and from time to time on or prior to the Closing Date, the Company
may
supplement or amend the Company’s Disclosure Schedule and Parent may supplement
and amend parent’s Disclosure Schedule in either case, to reflect any fact
necessary to make the representations true and correct (any such supplement
or
amendment, a “Disclosure
Update”).
For
purposes of determining whether the condition set forth in Section 6.2(a)
with
respect to the Company or 6.3(a) with respect to the Parent, has been satisfied,
(a) with respect to a fact or circumstance set forth on the Disclosure Update,
which fact or circumstance (i) exists as of the date of this Agreement or
(ii)
arises after the date of this Agreement and constitutes a Company Material
Adverse Effect or a Parent Material Adverse Effect, as the case may be, the
Company’s Disclosure Schedule or Parent’s Disclosure Schedule, as applicable,
will not be deemed amended by the Disclosure Update, and (b) with respect
to a
fact or circumstance set forth on the Disclosure Update, which fact or
circumstance arises after the date of this Agreement and which does not
constitute a Company Material Adverse Effect, or a Parent Material Adverse
Effect, as the case may be, the Company’s Disclosure Schedule or Parent’s
Disclosure Schedule, as applicable, will be deemed updated by the Disclosure
Update.
55
5.13. No
Solicitation.
On the
date of this Agreement, the Company and the Parent shall (a) immediately
cease,
and cause their respective Representatives immediately to cease, all existing
activities, discussion and negotiations with any third parties with respect
to
any Acquisition Proposal, and (b) promptly notify each of their respective
Representatives of its obligations under this Section 5.13. From the date
hereof
until the earlier of the Effective Time or the termination of this Agreement
in
accordance with its terms, neither the Company nor the Parent shall, nor
shall
they authorize or permit any of their respective Representatives, directly
or
indirectly to, (i) initiate, solicit, participate in any discussions or
negotiations regarding, provide any non-public information with respect to,
or
intentionally encourage or seek any inquiries or communications relating
to the
making of any Acquisition Proposal; (ii) enter into any letter of intent,
memorandum, agreement in principle, merger agreement, acquisition agreement,
option agreement or other agreement constituting or related to an Acquisition
Proposal, or (iii) release any Third Party from, or waive compliance with
any
standstill or confidentiality provisions of any agreement to which it is
a party
(other than a confidentiality Agreement referred to in and as permitted by
this
Section 5.13).
(a) Upon
the
terms and subject to the conditions set forth in this Agreement, each party
hereto shall use reasonable best efforts to take, or cause to be taken, all
actions, and do, or cause to be done, and to assist and cooperate with the
other
party or parties in doing, all things necessary, proper or advisable to
consummate and make effective, in the most expeditious manner practicable,
the
Merger and the other transactions contemplated hereby, and by the Related
Agreements and to satisfy or cause to be satisfied all of the conditions
precedent that are set forth in Article VI, as applicable to each of them,
including preparing and filing as soon as practicable all documentation to
effect all necessary notices, reports and other filings and to obtain as
soon as
practicable all consents, registrations, approvals, permits and authorizations
necessary or advisable to be obtained from any third party (including the
respective independent accountants of the Company and Parent) and/or any
Governmental Authority in order to consummate the Merger or any of the other
transactions contemplated hereby. This obligation shall include, (i) the
Company’s commitment to cooperate with, and provide reasonable assistance to,
Parent in obtaining Permitted Parent Indebtedness (including without limitation,
providing such information as may be reasonably requested from a potential
lending source), and (ii) on the part of Parent, sending a termination letter
to
Agent in substantially the form of Exhibit A attached to the Investment
Management Trust Agreement by and between Parent and Agent dated as of June
13,
2007. Subject to applicable laws relating to the exchange of information
and the
preservation of any applicable attorney-client privilege, work-product doctrine,
self-audit privilege or other similar privilege, each of the Company and
Parent
shall have the right to review and comment on in advance, and to the extent
practicable each will consult the other on, all the information relating
to such
party that appears in any filing made with, or written materials submitted
to,
any third party and/or any Governmental Authority in connection with the
Merger
and the other transactions contemplated hereby. In exercising the foregoing
right, each of the Company and Parent shall act reasonably and as promptly
as
practicable.
56
(b) Each
party hereto, at the reasonable request of another party hereto, shall execute
and deliver such other instruments and do and perform such other acts and
things
as may be necessary or desirable for effecting completely the consummation
of
this Agreement and the transactions contemplated hereby.
(c) The
Company shall use its reasonable best efforts to obtain all Approvals from
third
parties that are set forth in Section 3.5 of the Company’s Disclosure Schedule
and identified with an asterisk (“Company
Third Party Consents”).
Parent and Acquisition Sub shall use their respective reasonable best efforts
to
obtain all Approvals from third parties that are set forth in Section 5.5
of the
Company’s Disclosure Schedule and identified with an asterisk (“Parent/Acquisition
Sub Third Party Consents”).
5.15. Company
Affiliates.
Prior
to the Closing Date, the Company shall deliver to Parent a written schedule
identifying each of its “affiliates” (as that term is defined for purposes of
paragraphs (c) and (d) of Rule 145) (each, a “Company
Affiliate”)
and
will provide Parent with such information and documents as Parent reasonably
requests for purposes of reviewing such schedule. The Company will use its
reasonable best efforts to deliver or cause to be delivered to Parent prior
to
the Effective Time from each Company Affiliate an executed affiliate agreement
in substantially the form attached hereto as Exhibit
A
(the
“Company
Affiliate Agreement”),
each
of which will be in full force and effect as of the Effective Time.
5.16. Registration
Rights Agreement.
On or
prior to the Closing Date, (a) Parent will execute and deliver to the Company
(on behalf of the Company Affiliates), a Registration Rights Agreement in
substantially the form attached hereto as Exhibit
B
(the
“Registration
Rights Agreement”),
and
(b) the Company will use its reasonable best efforts to deliver or cause
to be
delivered to Parent the Registration Rights Agreement executed by each Company
Affiliate.
ARTICLE
VI
6.1. Conditions
to Obligation of Each Party to Effect the Merger.
The
respective obligations of each party to effect the Merger shall be subject
to
the satisfaction or waiver by Parent and the Company at or prior to the Closing
of the following condition:
(a) Governmental
Approvals.
All
applicable waiting periods or approvals under the HSR Act or any other Antitrust
Laws shall have expired or been terminated or received. All other Approvals
of,
or declarations or filings, with any Governmental Authority necessary for
the
consummation of the Merger, if any, shall have been obtained or
made.
(b) Stockholder
Approval.
Company
Stockholder Approval and Parent Stockholder Approval shall have been
obtained.
57
(c) Registration
Statement Effective.
The S-4
shall have been declared effective by the SEC.
6.2. Additional
Conditions to Obligations of Parent and Acquisition Sub.
The
obligations of Parent and Acquisition Sub to effect the Merger shall be subject
to the satisfaction or waiver by Parent at or prior to the Closing of the
following additional conditions:
(a) Representations
and Warranties.
After
giving effect to any Disclosure Update in accordance with Section 5.12, if
applicable, each of the representations and warranties set forth in Article
III
that is qualified by “materiality,” “Company Material Adverse Effect” or a
similar qualifier shall be true and correct in all respects, and each of
such
representations and warranties that is not so qualified shall be true and
correct in all material respects, in each case, on the date of this Agreement
and on and as of the Closing Date as though made on and as of the Closing
Date
(except for representations and warranties made as of a specified date, the
accuracy of which will be determined only as of the specified
date).
(b) Agreements
and Covenants.
The
Company shall have performed or complied, in all material respects, with
each
obligation, agreement and covenant to be performed or complied with by it
under
this Agreement at or prior to the Effective Time.
(c) Compliance
Certificate.
The
Company shall have delivered to Parent a certificate of the President or
Chief
Executive Officer of the Company, dated as of the Closing Date, certifying
that
the conditions set forth in Sections 6.2(a), (b), (h) and (k) have been
satisfied.
(d) Consents.
Each of
the Company Third Party Consents shall have been received in form and substance
reasonably satisfactory to Parent.
(e) Secretary’s
Certificate.
The
Company shall have delivered to Parent a certificated signed by the Company’s
corporate Secretary certifying as to: (i) an attached copy of the resolutions
of
the Board of Directors of the Company and an attached copy of the resolutions
of
the Requisite Holders, in each case authorizing and approving the execution,
delivery and performance of, and the consummation of the transactions
contemplated by, this Agreement and the other Related Agreements, and stating
that the resolutions thereby certified have not been amended, modified, revoked
or rescinded; (ii) the incumbency, authority and specimen signature of each
officer of the Company executing this Agreement and the Related Agreements;
and
(iii) an attached (as in effect from the time the resolutions described above
were adopted until the Closing) copy of the Company’s Certificate of
Incorporation and Bylaws or other organizational documents, and (iv) an attached
certificate of good standing from the Secretary of State of its jurisdiction
of
incorporation and the Secretary of State of each jurisdiction in which it
is
qualified or licensed to do business, each dated a reasonable date prior
to the
Closing Date.
(f) Escrow
& Exchange Agreement.
The
Company, Holder Representative and the Agent shall have executed and delivered
the Escrow and Exchange Agreement in form and substance mutually agreeable
to
Parent and the Company (the “Escrow
& Exchange Agreement”),
the
same shall be in full force and effect and the actions required to be taken
thereunder by the parties thereto prior to the Effective Time shall have
been
performed.
58
(i) There
shall not be any Law enacted, entered, enforced or otherwise in effect and
deemed applicable to the Merger, which makes the consummation of the Merger
on
the terms, and conferring upon the Parent and the Surviving Corporation all
of
their respective rights and benefits, contemplated herein, illegal.
(ii) No
temporary restraining order, preliminary or permanent injunction or other
Order
(whether temporary, preliminary or permanent) issued by any Court of competent
jurisdiction or other legal restraint or prohibition shall be in effect which
prevents the consummation of the Merger on the terms, and conferring upon
the
Parent and the Surviving Corporation all of their respective rights and
benefits, contemplated herein.
(iii) There
shall not be pending any Action by any Person that seeks to prevent the
consummation of the Merger on the terms, and conferring upon the Parent and
the
Surviving Corporation all of their respective rights and benefits, contemplated
herein, or seeking the award of damages payable by or any other remedy against
Parent or the Surviving Corporation if the Merger is consummated.
(h) Maximum
Dissenting Shares.
Not
more than 10% of the outstanding shares of Company Stock outstanding immediately
prior to the Effective Time shall be Dissenting Shares.
(i) Conversion
Rights.
Holders
of 30% or more of the shares of Parent Common Stock issued in Parent’s IPO and
outstanding immediately prior to the Closing shall not have exercised their
rights to convert their shares into a pro rata portion of the Trust Account.
(j) Parent
Stockholder Approvals.
The
Charter Amendment and Parent Plan shall have been duly adopted and approved
by
Parent’s stockholders.
(k) Cancellation
of Securities.
All
Company Options, Company Warrants, Secured Warrants and Bridge Notes shall
have
been cancelled effective as of the Effective Time.
(l) Key
Employee Letter Agreements.
Each of
the Key Employee Letter Agreements shall remain in full force and
effect.
(m) Principal
Stockholder Agreements.
Each of
the Principal Stockholders shall have executed and delivered a letter agreement,
substantially in the form of Exhibit
C
hereto
(the “Principal
Stockholder Agreements”), and
the same shall be in full force and effect.
(n) Legal
Opinion.
Parent
shall have received a legal opinion, substantially in the form of Exhibit
D
hereto,
from Xxxxxxxx Xxxxxx, the Company’s counsel, dated as of the Closing
Date.
(o) Patent
Opinion.
Parent
shall have received a legal opinion about intellectual property matters,
substantially in the form of Exhibit
E-1
hereto
from Xxxxxx & Bird LLP, patent counsel to the Company, and separate legal
opinion about intellectual property matters, substantially in the form of
Exhibit
E-2
hereto
from Xxxxxxxx, Xxxxx, Xxxxx & Xxxxxxxx, P.C., patent counsel to the Company,
in each case, dated as of the Closing Date.
59
(p) Parent
Voting Agreement.
The
voting agreement in the form of Exhibit
F
hereto
(the “Parent
Voting Agreement”)
shall
have been executed and delivered by each of the Principal Stockholders and
shall
be in full force and effect.
(q) Registration
Rights Agreement.
The
Registration Rights Agreement shall have been executed and delivered by each
Company Affiliate and shall be in full force and effect.
(r) Resignations.
Each of
the Company’s officers and directors (other than such individuals who are
designated as Initial Officers and Directors or the Company’s Designees) shall
have executed and delivered a letter of resignation effective as of the
Effective Time.
(s) Capitalization
Schedule.
The
Company shall have delivered to Parent a schedule, certified by the Company’s
Chief Executive Officer and Chief Financial Officer, setting forth, with
respect
to each Company Holder, to the extent applicable (a)(i) the number of shares
of
Company Common Stock and Company Preferred Stock held by such Company Holder,
(ii) the number of shares of Company Common Stock issuable upon conversion
of
all such shares of Company Preferred Stock (including shares issuable upon
conversion of all accrued and unpaid dividends thereon), (iii) the number
of
Option Shares underlying all Company Options held by such Company Holder,
indicating those which are vested and exercisable, and those which are unvested,
(iv) the number of Warrant Shares underlying all Company Warrants and Secured
Warrants held by such Company Holder, and (v) the aggregate principal amount
of
all Bridge Notes held by such Company Holder, in each case, as of the Closing
Date, immediately prior to the Effective Time, and (b) the number of shares
of
Parent Common Stock, Parent Options, Parent Warrants, Parent Secured Warrants
and Parent Bridge Warrants to which such Company Holder shall be entitled
in
connection with the Merger in respect of all the Company Securities held
by such
Company Holder.
(t) Other
Deliveries.
At or
prior to the Closing, the Company shall have delivered to Parent such other
documents and or certificates as shall be reasonably requested by Parent
and its
counsel in order to consummate the transactions contemplated by this
Agreement.
6.3. Additional
Conditions to Obligations of the Company.
The
obligations of the Company to effect the Merger shall be subject to the
satisfaction or waiver by the Company at or prior to the Effective Time of
the
following additional conditions:
(a) Representations
and Warranties.
Each of
the representations and warranties set forth in Article V that is qualified
by
“materiality” or a similar qualifier shall be true and correct in all respects,
and each of such representations and warranties that is not so qualified
shall
be true and correct in all material respects, in each case, on the date of
this
Agreement and on and as of the Closing Date as though made on and as of the
Closing Date (except for representations and warranties made as of a specified
date, the accuracy of which will be determined only as of the specified
date).
60
(b) Agreements
and Covenants.
Each of
Parent and Acquisition Sub shall have performed or complied, in all material
respects, with each obligation, agreement and covenant to be performed or
complied with by it under this Agreement at or prior to the Effective
Time.
(c) Compliance
Certificate.
Parent
shall have delivered to the Company a certificate of the President or Chief
Executive Officer of Parent, dated as of the Closing Date, certifying that
the
conditions set forth in Sections 6.3(a) and (b) have been
satisfied.
(d) Consents.
Each of
the Parent/Acquisition Sub Third Party Consents shall have been received
in form
and substance reasonably satisfactory to the Company.
(e) Secretary’s
Certificate.
The
Parent shall have delivered to the Company a certificated signed by the Parent’s
corporate Secretary certifying as to: (i) an attached copy of the resolutions
of
the Board of Directors of the Parent authorizing and approving the execution,
delivery and performance of, and the consummation of the transactions
contemplated by, this Agreement and the other Related Agreements, and stating
that the resolutions thereby certified have not been amended, modified, revoked
or rescinded; (ii) the incumbency, authority and specimen signature of each
officer of the Company executing this Agreement and the Related Agreements;
and
(iii) an attached (as in effect from the time the resolutions described above
were adopted until the Closing) copy of the Parent’s Certificate of
Incorporation and Bylaws or other organizational documents, and (iv) an attached
certificate of good standing from the Secretary of State of its jurisdiction
of
incorporation and the Secretary of State of each jurisdiction in which it
is
qualified or licensed to do business, each dated a reasonable date prior
to the
Closing Date.
(f) Resignations.
Each of
Parent’s officers and directors (other than such individuals who are designated
as Initial Officers and Directors or Parent’s Designees) shall have executed and
delivered a letter of resignation effective as of the Effective Time.
(g) Registration
Rights Agreement.
The
Registration Rights Agreement shall have been executed and delivered by Parent
and be in full force and effect.
(h) Exchange
Agreement.
The
Parent and the Agent shall have executed and delivered the Escrow & Exchange
Agreement, the same shall be in full force and effect and the actions required
to be taken thereunder by the parties thereto prior to the Effective Time
shall
have been performed.
(i) There
shall not be any Law enacted, entered, enforced or otherwise in effect and
deemed applicable to the Merger, which makes the consummation of the Merger
on
the terms, and conferring upon the Stockholders all of their respective rights
and benefits, contemplated herein, illegal.
(ii) No
temporary restraining order, preliminary or permanent injunction or other
Order
(whether temporary, preliminary or permanent) issued by any Court of competent
jurisdiction or other legal restraint or prohibition shall be in effect which
prevents the consummation of the Merger on the terms, and conferring upon
the
Stockholders all of their respective rights and benefits, contemplated
herein.
61
(iii) There
shall not be pending any Action by any Person, nor shall any threat of any
such
Action have been made by any Person in writing and not withdrawn, in either
case
that seeks to prevent the consummation of the Merger on the terms, and
conferring upon the Stockholders all of their respective rights and benefits,
contemplated herein.
(j) SEC
Compliance.
Immediately prior to the Closing, Parent shall be in material compliance
with
the reporting requirements under the Exchange Act.
(k) Legal
Opinion.
The
Company shall have received a legal opinion, substantially in the form of
Exhibit
G
hereto,
from Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., Parent’s counsel,
dated as of the Closing Date.
(l) Parent
Voting Agreement.
The
Parent Voting Agreement shall have been executed and delivered by each of
the
Principal Stockholders and shall be in full force and effect.
(m) Other
Deliveries.
At or
prior to the Closing, Parent shall have delivered to the Company such other
documents and or certificates as shall be reasonably requested by the Company
and its counsel in order to consummate the transactions contemplated by this
Agreement.
ARTICLE
VII
7.1. Termination.
This
Agreement may be terminated (in the case of clauses (b) - (f) below, by written
notice of the terminating party to the other parties hereto) and the Merger
contemplated hereby may be abandoned at any time prior to the Effective
Time:
(a) By
mutual
written consent duly authorized by the Boards of Directors of Parent and
the
Company;
(b) By
either
Parent or the Company if the Merger shall not have been consummated on or
before
the date which is 270 days from the date of this Agreement; provided, however,
that if the Merger shall not have been consummated solely due to any Approval
from any Governmental Authority not having been received (such date, as
extended, if applicable, the “Outside
Date”);
provided, further, that the right to terminate this Agreement under this
Section
7.1(b) shall not be available to any party whose failure to fulfill in all
material respects any obligation under this Agreement has been the cause
of, or
resulted in, the failure of the Merger to have been consummated on or before
such date; and, provided, further, that the Outside Date shall be extended,
and
neither Parent, on the one hand, nor the Company, on the other hand, may
terminate this Agreement under this Section 7.1(b) until the expiration of
the
10-day cure period set forth in Section 7.1(d)(ii)(B) or Section 7.1(e)(ii)(B),
as the case may be;
(c) By
either
Parent or the Company, if a Court or Governmental Authority shall have issued
an
Order or taken any other action, in each case, which has become final and
non-appealable and which restrains, enjoins or otherwise prohibits the
Merger;
62
(d) By
Parent, if neither Parent nor Acquisition Sub is in material breach of any
of
its obligations under this Agreement, and if the Company shall have breached
any
of its representations or warranties or failed to perform any of its covenants
or other agreements contained in this Agreement, which breach or failure
to
perform would render unsatisfied any condition contained in Section 6.1 or
6.2
and (i) is incapable of being cured, or (ii) if capable of being cured is
not
cured prior to the later of (A) the Business Day prior to the Outside Date,
or
(B) the date that is 10 days from the date that the Company is notified of
such
breach;
(e) By
the
Company, if it is not in material breach of any of its obligations under
this
Agreement, and if Parent or Acquisition Sub shall have breached in any material
respect any of its representations or warranties or failed to perform in
any
material respect any of its covenants or other agreements contained in this
Agreement, which breach or failure to perform would render unsatisfied any
condition contained in Section 6.2 or 6.3 and (i) is incapable of being cured,
or (ii) if capable of being cured is not cured prior to the later of (A)
the
Business Day prior to the Outside Date, or (B) the date that is 10 days from
the
date that Parent is notified of such breach; or
7.2. Effect
of Termination.
In the
event of the termination of this Agreement pursuant to Section 7.1, this
Agreement (other than this Section 7.2 and Section 7.3 and Article X which
shall
survive such termination) will forthwith become void; provided, that if this
Agreement is terminated as a result of any material breach of any
representations, warranties, obligations, covenants or other agreements by
either party under this Agreement, the non-breaching party shall be entitled
to
pursue a claim for damages arising therefrom in a court of competent
jurisdiction).
7.3. Expenses.
(a) Except
as
otherwise specified in Section 7.3(c) below, all fees, costs and expenses
incurred in connection with this Agreement and the Related Agreements and
the
transactions contemplated hereby, including, without limitation, legal,
accounting and investment banking fees (“Transaction
Expenses”),
shall
be paid by the party incurring such Transaction Expenses, whether or not
the
Merger is consummated.
(b) All
Transaction Expenses which are incurred by the Company or Parent through
the
Closing Date and which remain unpaid as of the Closing Date, to the extent
known
on the Closing Date shall be paid on the Closing Date as contemplated by
Section
2.1.
(c) Notwithstanding
anything to the contrary, fees payable in connection with filings made under
the
HSR Act pursuant to this Agreement will be borne equally by Parent and the
Company.
ARTICLE
VIII
8.1. Escrow.
(a) As
the
sole remedy for the indemnity obligations set forth in Article IX, at the
Closing, each Company Holder entitled to receive shares of Parent Common
Stock
pursuant to Section 1.6(d) or (e) or Section 1.10 shall deposit in escrow,
to be
held from the Closing Date until the first year anniversary thereof (such
period, the “Escrow
Period”),
and
for such further period as may be required pursuant to the Escrow & Exchange
Agreement referred to below, such number of shares of Parent Common Stock
as
shall equal the Indemnity Share Number multiplied by a fraction, the numerator
of which is the number of shares of Parent Common Stock to which such Company
Holder is entitled pursuant to Sections 1.6(d) and (e) and Section 1.10,
and the
denominator of which is the number of shares of Parent Common Stock to which
all
Company Holders are entitled pursuant to Sections 1.6(d) and (e) and Section
1.10 (all shares so deposited collectively, the “Indemnity
Shares”).
The
Indemnity Shares will be deposited, held and disbursed all in accordance
with
the terms and conditions of the Escrow & Exchange Agreement. For purposes
hereof, the “Indemnity
Share Number”
shall
equal 5% of the aggregate number of shares of Parent Common Stock to which
Company Holders shall be entitled pursuant to Sections 1.6(d) and (e) and
Section 1.10 hereof.
63
(b) Parent
Committee.
Prior
to the Closing, the Board of Directors of Parent shall appoint a committee
consisting of one or more of its then members to act on behalf of Parent
to take
all necessary actions and make all decisions pursuant to the Escrow &
Exchange Agreement regarding Parent’s right to indemnification pursuant to
Article IX hereof. In the event of a vacancy in such committee, the Board
of
Directors of Parent shall appoint as a successor a Person who was a director
of
Parent prior to the Closing Date or some other Person who would qualify as
an
“independent” director of Parent and who has not had any relationship with the
Company prior to the Closing. Such committee is intended to be the “Committee”
referred to in Article IX hereof and in the Escrow & Exchange
Agreement.
8.2. Holder
Representatives.
(a) Upon
the
approval of the Merger and the authorization of the form of this Agreement
by
the Company’s stockholders, and upon receipt of a written consent of Company
Holders, which consent may be included in the Letter of Transmittal, Xxxx
Xxxxxxx and Xxxxxxx Xxxxxx (together with any subsequent or successor
representative, the “Holder
Representatives”),
are
appointed, authorized and empowered to jointly (and not singly) be the exclusive
proxy, representative, agent and attorney-in-fact of each of the Company
Holders, with full power of substitution, to make all decisions and
determinations and to act and execute, deliver and receive all documents,
instruments and consents on behalf of the Company Holders, at any time, in
connection with, and that may be deemed by the Holder Representatives to
be
necessary or appropriate to accomplish the intent and implement the provisions
of, this Agreement and the Escrow & Exchange Agreement, and to facilitate
the consummation of the transactions contemplated hereby and thereby, and
in
connection with the activities to be performed by or on behalf of such Company
Holders under this Agreement and the Escrow & Exchange Agreement (including,
without limitation, in connection with any and all claims for remedies brought
pursuant to this Agreement or the Escrow & Exchange Agreement). By executing
this Agreement, each Holder Representative accepts such appointment, authority
and power. Without limiting the generality of the foregoing, the Holder
Representatives acting jointly (and not singly) shall have the power to take
any
of the following actions on behalf of such Company Holders: (A) to execute
and
deliver the Escrow & Exchange Agreement (with such modifications or changes
therein as to which the Holder Representatives, in their sole discretion,
shall
have consented) and to agree to such amendments or modifications thereto
as the
Holder Representatives, in their sole discretion, may deem necessary or
desirable; (B) to give and receive notices, communications and consents under
this Agreement and the Escrow & Exchange Agreement; (C) to receive and
distribute payments pursuant to the Escrow & Exchange Agreement; (D) to
waive any provision of this Agreement or the Escrow & Exchange Agreement;
(E) to assert any claim or institute any Action; (F) to investigate, defend,
contest or litigate any Action initiated by any Person against the Holder
Representatives and/or the Indemnity Shares, as the Holder Representatives,
in
their sole discretion, may deem necessary or desirable; (G) to receive process
on behalf of any or all such Company Holders in any such Action; (H) to
negotiate, enter into settlements and compromises of, resolve and comply
with
orders of courts and awards of arbitrators or other third party intermediaries
with respect to any disputes arising under this Agreement or the Escrow &
Exchange Agreement, as the Holder Representatives, in their sole discretion,
may
deem necessary or desirable; (I) to agree to any offsets or other additions
or
subtractions of amounts to be paid under this Agreement or the Escrow &
Exchange Agreement as the Holder Representatives, in their sole discretion,
may
deem necessary or desirable; and (J) to make, execute, acknowledge and deliver
all such other agreements, guarantees, orders, receipts, endorsements, notices,
requests, instructions, certificates, stock powers, letters and other writings,
and, in general, to do any and all things and to take any and all action
that
the Holder Representatives, in their sole and absolute discretion, may consider
necessary or proper or convenient in connection with or to carry out the
activities described in this Agreement and by the Escrow & Exchange
Agreement.
64
(b) The
appointment of the Holder Representatives by each such Company Holder is
coupled
with an interest and may not be revoked in whole or in part (including, without
limitation, upon the death or incapacity of such Company Holder). Such
appointment shall be binding upon the heirs, executors, administrators, estates,
personal representatives, officers, directors, securityholders, successors
and
assigns of each such Company Holder. All decisions of the Holder Representatives
shall be final and binding on all of the Company Holders, and no such Company
Holders shall have the right to object, dissent, protest or otherwise contest
the same. Parent and the Surviving Corporation shall be entitled to rely
upon,
without independent investigation, any act, notice, instruction or communication
from the Holder Representatives and any document executed by the Holder
Representatives on behalf of any such Company Holders and shall be fully
protected in connection with any action or inaction taken or omitted to be
taken
in reliance thereon absent willful misconduct. If for any reason there is
less
than two Holder Representatives at any time, all references herein to the
Holder
Representatives shall be deemed to refer to the remaining Holder Representative,
if any, and the Company Holders owning a majority of the Company Stock held
by
all Company Holders (on an as-converted-to Common Stock basis) outstanding
immediately prior to the Effective Time. If any Holder Representative ceases
to
serve in such capacity, for any reason, such Person shall designate his or
her
successor. Failing such designation within 10 business days after the Holder
Representative has ceased to serve, those members of the Board of Directors
of
Parent who were directors of the Company prior to the Closing shall appoint
as
successor, a Person who was a former stockholder of the Company or such other
Person as such members shall designate.
(c) The
parties acknowledge that the Holder Representatives’ obligations under this
Article VII are solely as representatives of the Company Holders in the manner
set forth in the Escrow & Exchange Agreement with respect to the obligations
to indemnify Parent Indemnitees under Article IX and all payments to Parent
as a
result of such indemnification obligations shall be made solely from, and
to the
extent of, the Indemnity Shares. Out-of-pocket expenses of the Holder
Representatives for attorneys’ fees and other costs shall be borne by the
Company Holders.
65
ARTICLE
IX
(a) General.
Subject
to the terms and conditions of this Article IX (including without limitation
the
limitations set forth in Section 9.4), Parent, (the “Parent
Indemnitees”)
shall
be indemnified, defended and held harmless from and against all Losses asserted
against, resulting to, imposed upon, or incurred by any Parent Indemnitee
by
reason of, arising out of or resulting from:
(i) the
inaccuracy or breach of any representation or warranty of the Company contained
in or made pursuant to this Agreement, any Schedule or any certificate delivered
by the Company to Parent pursuant to this Agreement with respect hereto or
thereto in connection with the Closing; or
(ii) the
non-fulfillment or breach of any covenant or agreement of the Company contained
in this Agreement.
(b) Losses.
As used
in this Article IX, the term “Losses”
shall
include all actual losses, liabilities, damages, judgments, awards, orders,
penalties, settlements, costs and expenses (including, without limitation,
interest, penalties, court costs and reasonable legal fees and expenses),
including those arising from any demands, claims, suits, actions, costs of
investigation, notices of violation or noncompliance, causes of action,
proceedings and assessments whether or not made by third parties or whether
or
not ultimately determined to be valid. Solely for the purpose of determining
the
amount of any Losses (and not for determining any breach) for which Parent
Indemnitee may be entitled to indemnification pursuant to this Article IX,
any
representation or warranty contained in this Agreement that is qualified
by a
term or terms such as “material,” “materially,” or “Material Adverse Effect”
shall be deemed made or given without such qualification and without giving
effect to such words. Notwithstanding anything to the contrary contained
herein,
in no event shall the Parent Indemnities be entitled to recover consequential
or
punitive damages.
(c) No
Limitation for Investigation.
Subject
to Section 5.12, the representations, warranties, covenants and obligations
of
the Company, and the rights and remedies that may be exercised by the Parent
Indemnitees, shall not be limited or otherwise affected by or as a result
of any
information furnished to, or any investigation made by or knowledge of, any
of
the Parent Indemnitees or any of their representatives. For purposes of this
Agreement, each statement or other item of information set forth in the
Disclosure Schedule or in any Disclosure Update shall be deemed to be a
representation and warranty made by the Company in this Agreement.
9.2. Indemnification
of Third Party Claims.
The
indemnification obligations and liabilities under this Article IX with respect
to actions, proceedings, lawsuits, investigations, demands or other claims
brought against Parent by a Person other than the Company (a “Third
Party Claim”)
shall
be subject to the following terms and conditions:
66
(a) Notice
of Claim.
Parent,
acting through the Committee, will give the Holder Representatives prompt
written notice after receiving written notice of any Third Party Claim or
discovering the liability, obligation or facts giving rise to such Third
Party
Claim (a “Notice
of Claim”),
together with copies of all material documents served on or received by the
Parent Indemnity by such third party and the Representative shall be entitled
to
participate in the defense of Third Party Claim at its expense.
(b) Defense.
The
Holder Representatives (on behalf of the Company Holders) shall have the
right,
at its option (subject to the limitations set forth in subsection 9.2(c)
below)
and at its own expense, by prompt written notice to Parent, to assume the
entire
control of, subject to the right of Parent to participate (at its expense
and
with counsel of its choice) in, the defense, compromise or settlement of
the
Third Party Claim as to which such Notice of Claim has been given, and shall
be
entitled to appoint a recognized and reputable counsel reasonably acceptable
to
Parent to be the lead counsel in connection with such defense. If the Holder
Representatives are permitted and elects to assume the defense of a Third
Party
Claim:
(i) the
Holder Representatives shall diligently and in good faith defend such Third
Party Claim and shall keep Parent reasonably informed of the status of such
defense; provided, however, that in the case of any settlement providing
for
remedies other than monetary damages for which indemnification is provided,
Parent shall have the right to approve the settlement, which approval shall
not
be unreasonably withheld or delayed; and
(ii) Parent
shall cooperate fully in all respects with the Holder Representatives in
any
such defense, compromise or settlement thereof, including, without limitation,
the selection of counsel, and Parent shall make available to the Holder
Representatives all pertinent information and documents under its control.
(c) Limitations
of Right to Assume Defense.
The
Holder Representatives shall not be entitled to assume control of such defense
if (i) the Third Party Claim relates to or arises in connection with any
criminal proceeding, action, indictment, allegation or investigation; (ii)
the
Third Party Claim seeks an injunction or equitable relief against Parent;
or
(iii) there is a reasonable probability that a Third Party Claim may materially
and adversely affect Parent other than as a result of money damages or other
money payments. Parent does not have knowledge as of the date hereof of any
such
matters.
(d) Other
Limitations.
Failure
to give prompt Notice of Claim or to provide copies of relevant available
documents or to furnish relevant available data shall not constitute a defense
(in whole or in part) to any Third Party Claim by Parent against the Holder
Representatives and shall not affect the Holder Representatives’ duty or
obligations under this Article IX, except to the extent (and only to the
extent
that) such failure shall have materially and irrevocably adversely affected
the
ability of the Holder Representatives to defend against or reduce the liability
or caused or increased such liability or otherwise caused the damages for
which
the Holder Representatives are obligated to be greater than such damages
would
have been had Parent given the Holder Representatives prompt notice hereunder.
So long as the Holder Representatives are defending any such action actively
and
in good faith, Parent shall not settle such action. Parent shall make available
to the Holder Representatives all relevant records and other relevant materials
required by them and in the possession or under the control of Parent, for
the
use of the Holder Representatives and its representatives in defending any
such
action, and shall in other respects give reasonable cooperation in such defense.
67
(e) Failure
to Defend.
If the
Holder Representatives, promptly after receiving a Notice of Claim, fails
to
defend such Third Party Claim actively and in good faith, Parent will (upon
further written notice) have the right to undertake the defense, compromise
or
settlement of such Third Party Claim as it may determine in its reasonable
discretion, provided that the Holder Representatives shall have the right
to
approve any settlement, which approval will not be unreasonably withheld
or
delayed. In such event, the Holder Representatives shall cooperate fully
in all
respects with Parent in any such defense, compromise or settlement thereof,
including, without limitation, the selection of counsel, and the Holder
Representatives shall make available to Parent all pertinent information
and
documents under his or her control.
(f) Parent’s
Rights.
Anything in this Section 9.2 to the contrary notwithstanding, the Holder
Representatives shall not, without the written consent of Parent, settle
or
compromise any action or consent to the entry of any judgment which does
not
include as an unconditional term thereof the giving by the claimant or the
plaintiff to Parent of a full and unconditional release from all liability
and
obligation in respect of such action without any payment by Parent.
(g) Holder
Representatives Consent.
Unless
the Holder Representatives have consented to a settlement of a Third Party
Claim
(which consent shall not be unreasonably withheld or delayed), the amount
of the
settlement shall not be a binding determination of the amount of the Loss
and
such amount shall be determined in accordance with the provisions of the
Escrow
& Exchange Agreement
9.3. Indemnification
not Involving a Third Party Claim.
Any
claim by a Parent Indemnitee for recovery of Losses not involving a Third-Party
Claim may be made by Parent (on behalf of such Parent Indemnitee) in writing
and
delivered to the Holder Representatives. Such writing shall set forth, in
reasonable detail, the basis for the claim and the total dollar amount sought
(to the extent known at such time). Following delivery of such a written
notice
of a claim for recovery, the Holder Representatives and Parent shall cooperate
in good faith (with the advice and representation of legal counsel, accountants
and other advisors, if necessary) to determine the validity of the claim
and the
amount of recoverable Losses, if any. If the Holder Representatives and Parent
are unable to come to an agreement regarding same within 60 days following
the
delivery of such written notice of claim, the amount of the Loss if any shall
be
determined in accordance with the provisions of the Escrow & Exchange
Agreement.
9.4. Insurance.
To the
extent that any Losses that are subject to indemnification pursuant to this
Article IX are covered by insurance, Parent shall use commercially reasonable
efforts to obtain the maximum recovery under such insurance; provided that
Parent shall nevertheless be entitled to bring a claim for indemnification
under
this Article IX in respect of such Losses and the time limitations set forth
in
Section 9.5 hereof for bringing a claim of indemnification under this Agreement
shall be tolled during the pendency of such insurance claim. The existence
of a
claim by Parent for monies from an insurer or against a third party in respect
of any Loss shall not, however, delay any payment pursuant to the
indemnification provisions contained herein and otherwise determined to be
due
and owing by the Holder Representatives (on behalf of Company Holders). If
Parent has received the payment required by this Agreement from the Holder
Representatives (on behalf of Company Holders) in respect of any Loss and
later
receives proceeds from insurance in respect of such Loss, then, if and only
to
the extent that (a) such proceeds or other amounts are received during the
Escrow Period, (b) Indemnity Shares remain in escrow, and (c) a Parent
Indemnitee has a claim for Losses determined to be due and owing and not
yet
paid by the Holder Representatives (on behalf of the Company Holders) (a
“Unsettled
Claim”),
then
the amount of the Unsettled Claim shall be reduced by the sum of (i) the
amount
of insurance proceeds actually received by Parent, minus
(ii) an
amount equal to the annual increase in insurance costs directly resulting
from
Parent having made a claim for such insurance proceed, up to a maximum amount
equal to the aggregate amount of any payments received from the Holder
Representatives pursuant to this Agreement in respect of such Loss.
Notwithstanding any other provisions of this Agreement, it is the intention
of
the parties that no insurer or any other third party shall be (A) entitled
to a
benefit it would not be entitled to receive in the absence of the foregoing
indemnification provisions, or (B) relieved of the responsibility to pay
any
claims for which it is obligated.
68
(a) Survival;
Time Limitation.
The
representations, warranties, covenants and agreements in this Agreement or
in
any writing delivered by the Company to Parent in connection with this Agreement
shall survive the Closing for 12 months. All covenants set forth herein will
survive the Closing until such covenants are fully performed in accordance
with
the terms herein. Any claim set forth in a Notice of Claim sent prior to
the
expiration of the Escrow Period shall survive until final resolution thereof.
Except as set forth in the immediately preceding sentence, no claim for
indemnification under this Article IX shall be brought after the end of the
end
of the Escrow Period.
(b) Deductible.
No
amount shall be payable under Article IX unless and until the aggregate amount
of all indemnifiable Losses otherwise payable exceeds an amount equal to
$1,000,000 (the “Deductible”),
in
which event the amount payable shall only be the amount in excess of the
amount
of the Deductible.
(c) Aggregate
Amount Limitation.
Notwithstanding anything to the contrary contained herein, the aggregate
liability for Losses pursuant to Section 9.1 shall not in any event exceed
the
value of the Indemnity Shares and Parent shall have no claim against the
Company
Holders other than for the Indemnity Shares (and any proceeds of the shares
or
distributions with respect to the Indemnity Shares).
9.6. Exclusive
Remedy.
Parent
hereby acknowledges and agrees that, from and after the Closing, its sole
remedy
with respect to any and all claims for money damages arising out of or relating
to this Agreement shall be pursuant and subject to the requirements of the
indemnification provisions set forth in this Article IX. Notwithstanding
any of
the foregoing, nothing contained in this Article IX shall in any way impair,
modify or otherwise limit Parent’s or the Company’s right to bring any claim,
demand or suit against the other party based upon such other party’s actual
fraud or intentional or willful misrepresentation or omission, it being
understood that a mere breach of a representation and warranty, without
intentional or willful misrepresentation or omission, does not constitute
fraud.
69
9.7. Adjustment
to Transaction Consideration.
Amounts
paid for indemnification under Article IX shall be deemed to be an adjustment
to
the value of the shares of Parent Common Stock issued by Parent as a result
of
the Merger, except as otherwise required by Law.
ARTICLE
X
10.1. Entire
Agreement; Amendments.
This
Agreement, together with its schedules and exhibits, the Confidentiality
Agreement, the Related Agreements and all other ancillary agreements, documents
and instruments to be delivered in connection herewith contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements, either oral or written. Each party to this
Agreement acknowledges that no representations, inducements, promises or
agreements, orally or otherwise, have been made by any other party, or by
anyone
acting on behalf of any party, that are not embodied herein, and that no
other
agreement, statement, or promise not contained in this Agreement shall be
valid
or binding. This Agreement may be amended only by an instrument in writing
signed by duly authorized representatives of Parent, Acquisition Sub and
the
Company.
10.2. Assignment.
No
party hereto shall assign or otherwise transfer this Agreement or any of
its
rights hereunder, or delegate any of its obligations hereunder, without the
prior written consent of the other parties hereto; provided, that, Parent
and
Acquisition Sub may assign this Agreement to any Affiliate of Parent without
the
prior consent of the Company provided Parent shall continue to remain directly
and primarily liable for the performance of all of its obligations under
this
Agreement pursuant to documentation reasonably satisfactory to the Company.
Subject to the foregoing, this Agreement and the rights and obligations set
forth herein shall inure to the benefit of, and be binding upon the parties
hereto, and each of their respective successors, heirs, legal representatives
and permitted assigns.
10.3. Counterparts.
This
Agreement may be executed in two or more counterparts, any one of which need
not
contain the signatures of all parties, but all of which counterparts when
taken
together will constitute one and the same agreement. Facsimile signatures
and
.pdf copies of signature pages, shall constitute original signatures for
all
purposes of this Agreement. This Agreement shall become effective when each
party hereto shall have received a counterpart hereof signed by the other
parties hereto.
10.4. Governing
Law; Venue; Waiver of Jury Trial.
This
Agreement shall be governed by the Laws of the State of Delaware without
giving
effect to any choice of law or conflict of law provision or rule (whether
of the
State of Delaware or any other jurisdiction) that would cause application
of the
Laws of any jurisdiction other than the State of Delaware. Each of the parties
to this Agreement irrevocably submits to the exclusive jurisdiction of the
state
courts of Delaware and to the jurisdiction of the United States District
Court
for the State of Delaware, for the purpose of any Action arising out of or
relating to this Agreement. Each of the parties to this Agreement consents
to
service of process by delivery pursuant to Section 10.8 hereof and agrees
that a
final judgment in such jurisdiction in any Action shall be conclusive and
may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by Law. Each of the parties hereto waives any right to trial by
jury
with respect to any action related to or arising out of this Agreement or
any
Related Agreement or any transaction contemplated hereby or
thereby.
70
10.5. Specific
Performance.
The
rights and remedies of the parties hereto shall be cumulative. The transactions
contemplated by this Agreement are unique transactions and any failure on
the
part of any party to complete the transactions contemplated by this Agreement
on
the terms of this Agreement will not be fully compensable in damages and
the
breach or threatened breach of the provisions of this Agreement would cause
the
other parties hereto irreparable harm. Accordingly, in addition to and not
in
limitation of any other remedies available to the parties hereto for a breach
or
threatened breach of this Agreement, the parties shall be entitled to seek
specific performance of this Agreement and seek an injunction restraining
any
such party from such breach or threatened breach.
10.6. Interpretation.
The
Schedule of Defined Terms and the exhibits attached hereto are an integral
part
of this Agreement. Such schedule and exhibits attached to this Agreement
are
incorporated herein by this reference and all references herein to this
“Agreement” shall mean this Agreement together with such schedule and exhibits.
When a reference is made in this Agreement to Sections, subsections, schedules
or exhibits, such reference shall be to a Section, subsection, schedule or
exhibit to this Agreement unless otherwise indicated. The words “include,”
“includes” and “including” when used herein shall be deemed in each case to be
followed by the words “without limitation.” The word “herein” and similar
references mean, except where a specific Section or Article reference is
expressly indicated, the entire Agreement rather than any specific Section
or
Article. The table of contents and the headings contained in this Agreement
are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. As used herein, all pronouns shall include
the
masculine, feminine, neuter, singular and plural thereof whenever the context
and facts require such construction. Any information disclosed in any section
of
the Company’s Disclosure Schedule or Parent’s Disclosure Schedule shall be
deemed to be included in every other section of the Company’s Disclosure
Schedule or Parent’s Disclosure Schedule, respectively, to the extent applicable
and reasonably apparent from the information disclosed. Certain sections
of the
Company’s Disclosure Schedule and Parent’s Disclosure Schedule may contain
disclosures which include more information than is required by the Sections
of
the Agreement to which such sections relate and such additional disclosure
shall
not be deemed to mean that such information is required by such related Sections
of the Agreement (the fact that a Section of this Agreement calls for a listing
of material agreements does not necessarily mean that such agreement listed
on
the related Section of the Company’s Disclosure Schedule or Parent’s Disclosure
Schedule, as applicable, is material). Headings have been inserted on the
sections of the Company’s Disclosure Schedule and Parent’s Disclosure Schedule
for convenience of reference only and shall to no extent have the effect
of
amending or changing the express description of the sections of the Company’s
Disclosure Schedule or Parent’s Disclosure Schedule, respectively, as set forth
in this Agreement.
10.7. Severability.
If any
term or other provision of this Agreement is invalid, illegal or incapable
of
being enforced by any rule of Law or public policy, in any jurisdiction,
such
term or provision shall be ineffective to the extent of such invalidity or
unenforceability, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect and any such invalidity or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such term or provision in any other jurisdiction.
71
10.8. Notices.
All
notices or other communications which are required or permitted hereunder
shall
be in writing and sufficient if delivered personally or sent by
nationally-recognized overnight courier or by registered or certified mail,
postage prepaid, return receipt requested, or by facsimile or electronic
mail
(provided that any notice or communication sent by facsimile or electronic
mail
shall also be confirmed by another method permitted by this Section 10.8)
addressed as follows:
|
If
to Parent or
|
|
|
Acquisition
Sub:
|
|
|
00
Xxxx Xxxx
|
|
|
Xxxxxxxxxxxx,
Xxxxxxxxxx 00000
|
|
|
Attention:
K. Xxxxxxx Xxxxxxx, President
|
|
|
Telephone:
(000) 000-0000
|
|
|
Facsimile:
(000) 000-0000
|
|
|
E-mail:
xxxxxxxx@xxxxxxxxxxxxxxx.xxx
|
|
|
with
a copy to:
|
|
|
Mintz,
Levin, Cohn, Ferris, Glovsky & Popeo, P.C.
|
|
|
000
Xxxxx Xxxxxx
|
|
|
Xxx
Xxxx, Xxx Xxxx 00000
|
|
|
Attention:
Xxxx X. Xxxxxxxx, Esq.
|
|
|
Telephone:
(000) 000-0000
|
|
|
Facsimile:
(000) 000-0000
|
|
|
E-mail:
xxxxxxxxxx@xxxxx.xxx
|
|
|
If
to the Company:
|
Dynogen
Pharmaceuticals, Inc.
|
|
00
Xxxxxx Xxx.
|
|
|
Xxxxxxx,
Xxxxxxxxxxxxx 00000
|
|
|
Attention:
Xxx X. Xxxxxxxx, M.D.
|
|
|
Telephone:
(000) 000-0000
|
|
|
Facsimile:
(000) 000-0000
|
|
|
E-mail:
xxxxxxxxx@xxxxxxx.xxx
|
|
|
with
a copy to:
|
|
|
Xxxxxxxx
Xxxxxx
|
|
|
000
Xxxxxxxxx Xxxxxx
|
|
|
Xxx
Xxxx, XX 00000-0000
|
|
|
Attention:
Xxxxx Xxxx Xxxxxx, Esq.
|
|
|
Telephone:
(000) 000-0000
|
|
|
Facsimile:
(000) 000-0000
|
|
|
E-mail:
xxxxxxx@xxxxxxxx.xxx
|
72
or
to
such other address as the party to whom notice is to be given may have furnished
to the other party in writing in accordance herewith. All such notices or
communications shall be deemed to be received (a) in the case of personal
delivery, on the date of such delivery, (b) in the case of nationally-recognized
overnight courier, on the next Business Day after the date when sent, (c)
in the
case of mailing, on the third Business Day following the date on which the
piece
of mail containing such communication was posted, and (d) in the case of
facsimile transmission or electronic mail, on the Business Day sent if sent
during the normal business hours of the recipient and otherwise on the next
Business Day.
10.9. Representation
by Counsel.
Each
party hereto acknowledges that it has been advised by legal and any other
counsel retained by such party in its sole discretion. Each party acknowledges
that such party has had a full opportunity to review this Agreement and all
related exhibits, schedules and ancillary agreements and to negotiate any
and
all such documents in its sole discretion, without any undue influence by
any
other party hereto or any third party.
10.10. Construction.
The
parties have participated jointly in the negotiations and drafting of this
Agreement and in the event of any ambiguity or question of intent or
interpretation, no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any of the provisions
of
this Agreement.
10.11. Waivers.
At any
time prior to the Effective Time, any party hereto may extend the time for
the
performance of any of the obligations or other acts required by the other
party
hereunder, waive any inaccuracies in the representations and warranties of
the
other party contained herein or in any document delivered pursuant hereto
and
waive compliance by the other party with any of the agreements or conditions
contained herein. Any such extension or waiver shall be valid if set forth
in an
instrument in writing signed by the party or parties to be bound thereby.
No
waiver by any party, whether express or implied, of its rights under any
provision of this Agreement shall constitute a waiver of the party’s rights
under such provisions at any other time or a waiver of the party’s rights under
any other provision of this Agreement. No failure by any party to take any
action against any breach of this Agreement or default by another party shall
constitute a waiver of the former party’s right to enforce any provision of this
Agreement or to take action against such breach or default or any subsequent
breach or default by the other party.
10.12. Disclaimer
of Additional Representations and Warranties.
Except
as set forth in this Agreement, any Related Agreement or in any other agreement,
exhibit, schedule, certificate, instrument or other writing delivered in
connection with this Agreement, no party hereto makes any additional
representation or warranty to any other party hereto. All representations
and
warranties of the Parent and Acquisition Sub contained in this Agreement,
and,
except as otherwise specifically provided for therein, in any Related Agreement
or in any other agreement, exhibit, schedule, certificate, instrument or
other
writing delivered in connection with this Agreement, shall survive the Closing
until the date which is the twelve-month anniversary of the Closing Date.
All
representations and warranties of the Company contained in this Agreement,
any
Related Agreement or in any other agreement, exhibit, schedule, certificate,
instrument or other writing delivered in connection with this Agreement shall
survive the Closing in accordance with Article IX hereof.
73
10.13. No
Third Party Beneficiaries.
No
provision of this Agreement is intended to confer upon any Person other than
the
parties hereto any rights or remedies hereunder; except (a) as expressly
provided in Article IX and (b) that the present and former officers and
directors of the Company are intended third party beneficiaries of the
provisions of Section 5.8 and shall have the right to enforce the same in
their
own names.
[Remainder
of Page Intentionally Left Blank]
74
|
PARENT:
|
|||
|
|
|||
|
By:
|
/s/ Xxxxxxx X. Xxxxxxx | ||
|
Xxxxxxx
X. Xxxxxxx, Chief Executive Officer
|
|||
|
ACQUISITION
SUB:
|
|||
|
APEX
ACQUISITION SUB, INC.
|
|||
|
By:
|
/s/ Xxxxxxx X. Xxxxxxx | ||
|
Xxxxxxx
X. Xxxxxxx, President
|
|||
|
COMPANY:
|
|||
|
DYNOGEN
PHARMACEUTICALS, INC.
|
|||
|
By:
|
/s/ Xxx X. Xxxxxxxx | ||
|
Xxx
X. Xxxxxxxx, Chief Executive Officer
|
|||
|
REPRESENTATIVES:
|
|||
| /s/ Xxxx Xxxxxxx | |||
|
XXXX
XXXXXXX
|
|||
| /s/ Xxxxxxx Xxxxxx | |||
|
XXXXXXX
XXXXXX
|
|||
75
Schedule
II
SCHEDULE
OF DEFINED TERMS
|
Acquisition
Proposal
|
Schedule
II
|
|
Acquisition
Sub
|
Preamble
|
|
Action
|
Schedule
II
|
|
Affidavit
of Loss
|
2.2(b)
|
|
Affiliate
|
Schedule
II
|
|
Aggregate
Exercise Price
|
Schedule
II
|
|
Agreement
|
Preamble
|
|
AMEX
|
4.20
|
|
Antitrust
Laws
|
5.3(b)
|
|
Approval
|
Schedule
II
|
|
Approved
Secured Debt
|
Schedule
II
|
|
Arachnova
|
5.1(b)(xv)
|
|
Blue
Sky Laws
|
Schedule
II
|
|
Bridge
Amount
|
Schedule
II
|
|
Bridge
Financing
|
Schedule
II
|
|
Bridge
Investor
|
1.10(a)(ii)
|
|
Bridge
Note
|
Schedule
II
|
|
Business
Combination
|
Schedule
II
|
|
Business
Day
|
Schedule
II
|
|
Certificate
of Merger
|
1.2
|
|
Certificates
|
2.2(b)
|
|
Charter
Amendment
|
5.2(f)(ii)
|
|
Closing
|
1.12
|
|
Closing
Date
|
1.12
|
|
COBRA
|
Schedule
II
|
|
COBRA
Coverage
|
3.18(i)
|
|
Code
|
Schedule
II
|
|
Comfort
Letter
|
5.2(d)
|
|
Commitment
|
5.1(c)
|
|
Committee
|
8.1(b)
|
|
Company
|
Preamble
|
|
Company
Affiliate
|
5.15
|
|
Company
Affiliate Agreement
|
5.15
|
|
Company
Assets
|
3.10(a)
|
|
Company
Board of Directors
|
Schedule
II
|
|
Company
Common Stock
|
1.6(d)
|
|
Company
Contracts
|
3.20(a)
|
|
Company
Holder
|
2.2(b)
|
|
Company
Intellectual Property Rights
|
3.24(a)
|
|
Company
Licenses
|
3.8
|
|
Company
Material Adverse Effect
|
Schedule
II
|
|
Company
Option
|
Schedule
II
|
Schedule
II
-1
|
Company
Plan
|
3.18(a)
|
|
Company
Preferred Stock
|
1.6(e)
|
|
Company
Security
|
2.2(d)
|
|
Company
Stock
|
1.6(e)
|
|
Company
Stockholder Approval
|
3.9(b)
|
|
Company
Third Party Consents
|
5.14(c)
|
|
Company
Warrant
|
Schedule
II
|
|
Company’s
Designees
|
Schedule
II
|
|
Company’s
Disclosure Schedule
|
Article
III Preamble
|
|
Company’s
Knowledge
|
Schedule
II
|
|
Company’s
Option Plan
|
Schedule
II
|
|
Computer
Systems
|
3.26
|
|
Confidentiality
Agreement
|
5.4
|
|
Contract
|
Schedule
II
|
|
Conversion
Ratio
|
1.6(d)
|
|
Court
|
Schedule
II
|
|
Debarred
|
3.28(d)
|
|
Deductible
|
9.5(b)
|
|
Deferred
Compensation Plan
|
3.18(n)
|
|
DGCL
|
Preamble
|
|
Disclosure
Update
|
5.12
|
|
Dissenting
Shares
|
1.13
|
|
E&Y
|
5.2(d)
|
|
EEOC
|
3.17(g)
|
|
Effective
Time
|
1.2
|
|
Environmental
Claim
|
Schedule
II
|
|
Environmental
Laws
|
Schedule
II
|
|
Environmental
Permits
|
Schedule
II
|
|
ERISA
|
Schedule
II
|
|
ERISA
Affiliate
|
3.18(d)
|
|
Escrow
Period
|
8.1(a)
|
|
Exchange
& Exchange Agreement
|
6.2(f)
|
|
Exchange
Act
|
Schedule
II
|
|
Excluded
Shares
|
1.6(c)
|
|
Fairness
Opinion
|
Preamble
|
|
FD&C
Act
|
3.5
|
|
FDA
|
3.28(a)
|
|
FDA
Permits
|
3.28(a)
|
|
Financial
Statements
|
3.13(a)
|
|
Financing
Parameters
|
Schedule
II
|
|
First
Success Fee Shares
|
1.11(d)
|
|
Forfeiting
Optionholder
|
1.11(d)
|
|
Fully-Diluted
Share Number
|
Schedule
II
|
|
Fundamental
Transaction
|
1.11(d)
|
|
GAAP
|
3.13(a)
|
|
Governmental
Authority
|
Schedule
II
|
Schedule
II
-2
|
Hazardous
Substance
|
Schedule
II
|
|
Holder
Representatives
|
8.2(a)
|
|
HSR
Act
|
3.5
|
|
IND
|
3.28(f)
|
|
Indebtedness
|
Schedule
II
|
|
Indemnity
Share Number
|
8.1(a)
|
|
Indemnity
Shares
|
8.1(a)
|
|
Initial
Officers
|
1.5
|
|
Initial
Officers and Directors
|
1.5
|
|
Intellectual
Property
|
Schedule
II
|
|
Interim
Balance Sheet
|
3.13(a)
|
|
Interim
Financial Statements
|
3.13(a)
|
|
IRB
|
3.28(c)
|
|
IRS
|
Schedule
II
|
|
Key
Employee Letter Agreements
|
Preamble
|
|
Key
Employees
|
Schedule
II
|
|
Laws
|
Schedule
II
|
|
Leased
Real Property
|
3.11(b)
|
|
Letter
of Transmittal
|
2.2(b)
|
|
Liability
|
Schedule
II
|
|
Lien
|
Schedule
II
|
|
Mailing
Date
|
5.2(g)
|
|
Material
Adverse Effect
|
9.1(b)
|
|
Merger
|
Preamble
|
|
Merger
Consideration
|
Schedule
II
|
|
Merger
Form 8-K
|
5.2(j)
|
|
NDA
|
3.28(f)
|
|
Notice
of Claim
|
9.2(a)
|
|
Option
Agreement
|
1.7(a)
|
|
Option
Shares
|
Schedule
II
|
|
Optionholder
|
1.7(a)
|
|
Order
|
Schedule
II
|
|
OSHA
|
Schedule
II
|
|
Other
Filings
|
5.2(b)
|
|
Outside
Date
|
7.1(b)
|
|
Parent
|
Preamble
|
|
Parent
Board of Directors
|
Schedule
II
|
|
Parent
Bridge Warrant
|
1.10(a)(i)
|
|
Parent
Common Stock
|
4.4(a)
|
|
Parent
Contracts
|
4.16(a)
|
|
Parent
Indemnitees
|
9.1
|
|
Parent
Material Adverse Effect
|
Schedule
II
|
|
Parent
Option
|
1.7(b)
|
|
Parent
Plan
|
5.2(f)(iv)
|
|
Parent
Preferred Stock
|
4.4(a)
|
|
Parent
Secured Warrant
|
1.9(a)
|
Schedule
II
-3
|
Parent
Signing Price
|
Schedule
II
|
|
Parent
Stockholder Approval
|
4.7(b)
|
|
Parent
Stockholders’ Meeting
|
3.27
|
|
Parent
Voting Agreement
|
6.2(p)
|
|
Parent
Warrant
|
1.8(b)
|
|
Parent/Acquisition
Sub Third Party Consents
|
5.14(c)
|
|
Parent’s
Designees
|
Schedule
II
|
|
Parent’s
Disclosure Schedule
|
Article
IV Preamble
|
|
Parent’s
IPO
|
Schedule
II
|
|
Parent’s
Knowledge
|
Schedule
II
|
|
Parent’s
SEC Documents
|
4.9(a)
|
|
Per
Share Merger Consideration
|
1.6(d)
|
|
Permitted
Liens
|
Schedule
II
|
|
Permitted
Parent Indebtedness
|
Schedule
II
|
|
Person
|
Schedule
II
|
|
Press
Release
|
5.2(j)
|
|
Principal
Stockholder Agreements
|
6.2(m)
|
|
Principal
Stockholders
|
Preamble
|
|
Proportionate
Share
|
1.11(d)
|
|
Prospectus
|
Schedule
II
|
|
Proxy
Statement
|
5.2(f)
|
|
PTO
|
3.24(k)
|
|
Qualified
Fundamental Transaction
|
1.11(d)
|
|
Real
Property Leases
|
3.11(b)
|
|
Registration
Rights Agreement t
|
5.16
|
|
Regulation
|
Schedule
II
|
|
Related
Agreements
|
Schedule
II
|
|
Related
Party
|
Schedule
II
|
|
Representatives
|
Schedule
II
|
|
Requisite
Holders
|
3.9(b)
|
|
Rule
145
|
Schedule
II
|
|
S-4
|
Schedule
II
|
|
SAS
72
|
5.2(d)
|
|
SEC
|
Schedule
II
|
|
Second
Success Fee Shares
|
1.11(d)
|
|
Secured
Lender
|
Schedule
II
|
|
Secured
Warrants
|
Schedule
II
|
|
Securities
Act
|
Schedule
II
|
|
Stockholder
|
1.6(f)
|
|
Success
Fee Recipient
|
1.11(d)
|
|
Surrender
Documents
|
2.2(c)
|
|
Surviving
Corporation
|
1.1
|
|
Tax
Returns
|
Schedule
II
|
|
Taxes
|
Schedule
II
|
|
Third
Party
|
Schedule
II
|
|
Third
Party Claim
|
9.2
|
Schedule
II
-4
|
Third
Party Intellectual Property Rights
|
3.24(d)
|
|
Total
Option Shares
|
Schedule
II
|
|
Transaction
Expenses
|
7.3(a)
|
|
Treasury
Shares
|
1.6(b)
|
|
Trust
Account
|
Schedule
II
|
|
Unsettled
Claim
|
9.4
|
|
Voting
Agreement
|
Preamble
|
|
WARN
Act
|
Schedule
II
|
|
Warrant
Agreement
|
1.8(a)
|
|
Warrant
Shares
|
Schedule
II
|
|
Warrantholder
|
1.8(a)
|
|
Year-End
Financial Statements
|
3.13(a)
|
Schedule
II
-5
“Acquisition
Proposal”
means,
any contract, proposal, offer, dissolution, inquiry or other indication of
interest relating to any of the following (other than the transactions
contemplated by this Agreement): (a) with respect to Parent, any Business
Combination, and (b) with respect to the Company, any merger, consolidation,
share exchange, take-over bid, recapitalization, dissolution, liquidation
or
other business combination directly or indirectly involving the Company,
or the
issuance or acquisition of shares of capital stock or other securities of
the
Company or any tender or exchange offer that if consummated would result
in any
Person, together with all Affiliates thereof, beneficially owning (as defined
in
Section 13(d) of the Exchange Act) 20% or more of the shares of Company Stock,
or the acquisition of any business or group of assets that generates 20%
or more
of the Company’s net income or net revenues or that constitutes 20% or more of
the assets of the Company taken as a whole.
“Action”
means
any suit, litigation, hearing, investigation, examination, inquiry, audit,
arbitration, cause of action, claim, complaint, grievance, charge, criminal
prosecution, investigation, governmental or other administrative proceeding,
whether at law or at equity, before or by any Court or Governmental Authority,
arbitrator or other tribunal.
“Affiliate”
means,
with respect to any Person, a Person that directly or indirectly, through
one or
more intermediaries, controls, is controlled by, or is under common control
with, the first mentioned Person; and “control” (including the terms “controlled
by” and “under common control with”) means the possession, directly or
indirectly, of the power to direct or cause the direction of the management
or
policies of a Person, whether through the ownership of stock or other
securities, as trustee or executor, by contract or otherwise.
“Aggregate
Exercise Price”
means
the aggregate amount payable to Parent upon full exercise of all Parent Options.
“Approval”
means
any license, permit, consent, approval, authorization, resignation, filing,
qualification, waiver or certification.
“Approved
Secured Debt”
means
secured debt financing of the Company, closing after the date hereof but
prior
to the Closing Date, in an aggregate amount not to exceed $10,000,000, the
material terms of which are at least as favorable to the Company as the
Financing Parameters or otherwise reasonably acceptable to Parent; the term
“Approved Secured Debt” includes any Secured Warrants issued in connection
therewith.
“Bridge
Amount”
means
the proceeds of any Bridge Financing.
“Bridge
Financing”
means
an unsecured, non-interest bearing convertible equity financing of the Company,
closing after the date hereof but prior to the Closing Date, in an aggregate
amount not to exceed $25,000,000 and on other terms reasonably acceptable
to
Parent, and “Bridge Investor” means any individual or entity providing Bridge
Financing.
“Bridge
Note”
means
an unsecured, convertible promissory note, issued in connection with the
Bridge
Financing and held by a Bridge Investor, evidencing the right to acquire
shares
of Company Common Stock.
Schedule
II
-6
“Blue
Sky Laws”
means
state securities laws and the regulations promulgated thereunder.
“Business
Combination”
means
a
merger, capital stock exchange, asset acquisition, stock purchase or other
similar business combination on the terms described in the Prospectus.
“Business
Day”
means
any day other than a Saturday, Sunday or day on which banks are permitted
to
close in the State of New York.
“COBRA”
means
the Consolidated Omnibus Budget Reconciliation Act of 1985.
“Code”
means
the Internal Revenue Code of 1986, as amended, and all Regulations promulgated
thereunder.
“Company
Board of Directors”
mean
the Board of Directors of the Company.
“Company
Material Adverse Effect”
means
any event, change, development, occurrence, effect, circumstance or condition
that, individually or in the aggregate with all other events, changes,
developments, occurrences, effects, circumstances or conditions, has had
or
could reasonably be expected to have (a) a material adverse effect on the
business, assets, properties, results of operations, prospects or financial
condition of the Company, or (b) a material adverse effect on the ability
of the
Company to consummate the transactions contemplated by this
Agreement.
“Company
Option”
means
an outstanding option to acquire shares of Company Common Stock which is
identified in Section 3.4(c) of the Company’s Disclosure Schedule.
“Company
Warrant”
means
an outstanding warrant to acquire Company Stock which is identified in Section
3.4(c) of the Company’s Disclosure Schedule and does not include Secured
Warrants.
“Company’s
Designees”
means
four individuals designated by the Company (subject to Parent’s reasonable
consent) prior to the Mailing Date, each of whom shall be an existing director
of the Company.
“Company’s
Knowledge”
and
all
permutations thereof, shall mean, with respect to any matter in question,
the
actual knowledge of such matter of any Key Employee. Each Key Employee shall
be
deemed to have actual knowledge of a particular fact, circumstance, event
or
other matter if such fact, circumstance, event or other matter is reflected
in
one or more documents (whether written or electronic) in the records or files
of
the Company that have been in such individual's possession.
“Company’s
Option Plan”
means
the Company’s 2002 Equity Incentive Plan.
“Contract”
means
any oral or written contract, agreement, license, lease or other instrument,
and
all amendments, modifications and supplements thereto.
“Court”
means
any court or arbitration tribunal of the United States, any domestic state,
or
any foreign country, and any political subdivision thereof.
Schedule
II
-7
“Environmental
Claim”
means
any Action, notice of noncompliance or violation, demand, allegation, request
for information, citation, summons, complaint or Order, penalty, fine or
Lien
arising pursuant to any Environmental Law.
“Environmental
Laws”
means
those Laws relating to pollution or the protection of public health, welfare
or
the environmental, including any Law relating to emissions, discharges or
releases of Hazardous Substances into the environment or otherwise relating
to
generation, use, treatment, storage, disposal, transportation or handling
of
Hazardous Substances.
“Environmental
Permits”
means
any Approval required pursuant to any Environmental Law in connection with
the
conduct of the business of, or the use or operation of any Real Property
by the
Company.
“ERISA”
means
the Employee Retirement Income Security Act of 1974, as amended.
“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended, and the rule and regulations
promulgated thereby.
“Financing
Parameters”
means
the following (a) interest rate of 11% per annum, (b) aggregate fees to the
lender equal to 2% of the aggregate principal amount, (c) prepayment penalties
equal to 5% of the aggregate principal amount, (d) issuance of Secured Warrants,
(e) secured by a first priority security interest in all of the Company’s
assets, excluding intellectual property, (f) a negative pledge on the Company’s
intellectual property with exceptions permitting exclusive and non-exclusive
licensing, partnerships and joint ventures in the ordinary course of business,
and (g) such other customary terms and conditions as may be reasonably
acceptable to Parent.
“Fully-Diluted
Share Number”
means
(a) the number of shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time (including any shares of Company
Common
Stock issued upon the exercise of Company Options or Company Warrants after
the
date of this Agreement but prior to the Effective Time), plus
(b)
the
number of shares of Company Common Stock issuable upon full conversion of
all
shares of Company Preferred Stock (including any shares of Company Preferred
Stock issued upon the exercise of Company Warrants after the date of this
Agreement but prior to the Effective Time), but does not include any Option
Shares or Warrant Shares..
“Governmental
Authority”
means
any governmental agency, authority, department, commission, board, bureau,
Court
or instrumentality of the United States, any domestic state, or any foreign
country, and any political subdivision or agency thereof, and includes any
authority having governmental or quasi-governmental powers, including any
administrative agency or commission.
“Hazardous
Substance”
means
any material, substance, waste or product which is defined as hazardous,
toxic
or a pollutant in, and is regulated under, any Environmental Law, including,
but
not limited to, asbestos, polychlorinated biphenyls and petroleum or petroleum
by-products.
“Indebtedness”
means
Liabilities (a) for borrowed money, or with respect to deposits or advances
of
any kind (other than deposits, advances or excess payments accepted in
connection with the sale of products or services in the ordinary course of
business), (b) evidenced by bonds, debentures, notes or similar instruments,
(c)
upon which interest charges are customarily paid (other than obligations
accepted in connection with the purchase of products or services in the ordinary
course of business), (d) under conditional sale or other title retention
agreements, (e) issued or assumed as the deferred purchase price of property
or
services (other than accounts payable to suppliers incurred in the ordinary
course of business and paid when due), (f) of others secured by (or for which
the holder of such Liabilities has an existing right, contingent or otherwise,
to be secured by) any Lien or security interest on property owned or acquired
by
the Person in question whether or not the obligations secured thereby have
been
assumed, and (g) under leases required to be accounted for as capital leases
under GAAP, (h) any obligations, contingent or otherwise, under acceptance
credit, letters of credit or similar facilities, and (i) any guaranty of
any of
the foregoing.
Schedule
II
-8
“Intellectual
Property”
means
any and all (i) patents, inventions, improvements, know-how, show-how, designs,
trade secrets, copyrights, works of authorship, moral rights, mask works,
rights
in databases, trademarks, trade names, service marks, fictitious and assumed
business names, Internet domain names, manufacturing processes, software
(including object code, source code, data, databases and documentation),
formulae, trade secrets, specifications and other confidential information,
technology and all other intellectual property and industrial property and
rights therein, (ii) registration and applications for registration of any
of
the foregoing, (iii) goodwill related to any of the foregoing (i) or (ii),
and
(iv) tangible embodiments of any of the foregoing (i), (ii) or
(iii).
“IRS”
means
the U.S. Internal Revenue Service.
“Key
Employees”
means
Xxx X. Xxxxxxxx, Xxxxx Xxxxxx, Xxxxxx Xxxxxxx, Xxxxxxx Xxxxxxxx, Xxxx Xxxxxx
and
Xxxxxx Xxxxxxx.
“Laws”
means
all laws, statutes, constitutions, treaties, codes, licensing requirements,
ordinances and Regulations of any Governmental Authority, including all Orders
having the effect of law in each such jurisdiction.
“Liability”
means
any liability, loss, assessment, damage, cost or expense (whether known or
unknown, whether asserted or unasserted, whether absolute or contingent,
whether
accrued or unaccrued, whether liquidated or unliquidated, and whether due
or to
become due), including any liability for Taxes.
“Lien”
means
any mortgage, lien, pledge, hypothecation, security interest, encumbrance,
equitable interest, claim, preference, right of possession, lease, tenancy,
license, encroachment, infringement, interference, proxy, option, right of
first
refusal, conditional sale agreement, preemptive right, community property
interest, impediment or exception to title, reservation of right, limitation
or
impairment of use, imperfection of title, attachment, easement, lien (statutory
or otherwise), condition or restriction of any nature, including any restriction
on the transfer of any asset, any restriction on the receipt of any income
derived from any asset, any restriction on the use of any asset and any
restriction on the possession, exercise or transfer of any other attribute
of
ownership of any asset (including any agreement to give any of the
foregoing).
Schedule
II
-9
“Merger
Consideration”
means
the consideration payable to Stockholders (other than holders of Dissenting
Shares, Treasury Shares and Excluded Shares), and may refer to the aggregate
consideration payable to all Stockholders (other than holders of Dissenting
Shares, Treasury Shares and Excluded Shares), as the context may
require.
“Option
Shares”
means,
with respect to a particular Company Option, the number of shares of Company
Common Stock subject to such Company Option immediately prior to the Effective
Time (without regard to vesting, but taking into account any adjustments
required to be made pursuant to the terms thereof).
“Order”
means
any judgment, order, award, writ, injunction, ruling, verdict, decision or
decree of, or any settlement under the jurisdiction of any Court or Governmental
Authority.
“OSHA”
means
the Occupational Safety Health Administration.
“Parent
Board of Directors”
mean
the Board of Directors of Parent.
“Parent
Material Adverse Effect”
means
any event, change, development, occurrence, effect, circumstance or condition
that, individually or in the aggregate with all other events, changes,
developments, occurrences, effects, circumstances or conditions, has had
or
could reasonably be expected to have (a) a material adverse effect on the
business, assets, properties, results of operations, prospects or financial
condition of the Parent, or (b) a material adverse effect on the ability
of the
Parent to consummate the transactions contemplated by this Agreement other
than
any event, change, development, occurrence, effect or circumstance constituting
a Company Material Adverse Effect which would adversely effect Parent were
the
Merger to be effected.
“Parent
Signing Price”
means
$7.27, and reflects an amount equal to the greater of the volume weighted
average price of Parent Common Stock during the 20 trading day period
immediately preceding the date of this Agreement, as reported on the AMEX,
and
$6.00.
“Parent’s
Designees”
means
four individuals designated by Parent (subject to the Company’s reasonable
consent) prior to the Mailing Date, each of whom shall be an existing director
of Parent.
“Parent’s
IPO”
means
Parent’s initial public offering of the initial public offering of 7,500,000
units of securities of Parent.
“Parent’s
Knowledge”
and
all
permutations thereof, shall mean, with respect to any matter in question,
the
actual knowledge of such matter of Xxxx X. Xxxxxxxx, K. Xxxxxxx Xxxxxxx,
Xxxxxxx
X. Xxxxxxx, Xxxxxx X. Xxxxxx and Xxxxxx Xxx Xxxxxxxx. Each of such Persons
shall
be deemed to have actual knowledge of a particular fact, circumstance, event
or
other matter if such fact, circumstance, event or other matter is reflected
in
one or more documents (whether written or electronic) in, or that have been
in,
such individual's possession, including personal files.
“Permitted
Liens”
means
(a) statutory Liens for Taxes, assessments and other governmental charges
which
are not yet due and payable or are due but not delinquent or are being contested
in good faith by appropriate proceedings, (b) statutory or common law Liens
to
secure sums not yet due to landlords, sublandlords, licensors or sublicensors
under leases or rental agreements, (c) deposits or pledges made in connection
with, or to secure payment of, workers’ compensation, unemployment insurance,
old age pension or other social security programs mandated under applicable
Laws, (d) statutory or common law Liens in favor of carriers, warehousemen,
mechanics, workmen, repairmen and materialmen to secure claims for labor,
materials or supplies and incurred in the ordinary course of business for
sums
not yet due, (e) restrictions on transfer of securities imposed by applicable
state and federal securities Laws, and (f) Liens resulting from a filing
by a
lessor as a precautionary filing for a true lease.
Schedule
II
-10
“Permitted
Parent Indebtedness”
means
loans to Parent in an aggregate amount not to exceed $750,000 on terms approved
by Parent’s Board of Directors and reasonably acceptable to the Company giving
consideration to the facts and circumstances existing at the time such loans
are
made; the term “Permitted Parent Indebtedness” includes warrants to purchase
shares of Parent Common Stock in connection with the Permitted Parent
Indebtedness.
“Person”
means
an individual, corporation, partnership, association, trust, unincorporated
organization, limited liability company, other business entity, or other
legal
entity.
“Prospectus”
means
the Final Prospectus, dated June 7, 2007, relating to Parent’s IPO.
“Regulation”
means
any rule or regulation of any Governmental Authority.
“Related
Agreements”
means
the Exchange Agreement and all other documents and instruments created in
connection with or pursuant to this Agreement.
“Related
Party”
means
(a) each Person who owns of record or beneficially at least five percent
of the
outstanding capital stock of the Company as of the date of this Agreement,
(b)
each individual who is, as of the date of this Agreement, an officer or director
of the Company, and any Affiliate of any Person described in clause (a) or
(b)
of this definition.
“Representatives”
means,
with respect to any specified Person, such Person’s officers, directors,
employees, accountants, counsel and other representatives or agents (including,
any investment banking firm”)
“Rule
145”
means
Rule 145 promulgated under the Securities Act.
“SEC”
means
the U.S. Securities and Exchange Commission.
“Secured
Lender”
mean
a
lender of Approved Secured Debt.
“Secured
Warrants”
mean
warrants issued to Secured Lenders in connection with Approved Secured Debt
(a)(i) to purchase, following the Effective Time, such number of shares of
Parent Common Stock as shall not exceed, in the aggregate, (ii) the aggregate
principal amount of the Approved Secured Debt, multiplied by (A) 0.07, divided
by (B) the Parent Signing Price (rounding the resulting number down to the
nearest whole number), (iii) at a per share exercise price no less than the
Parent Signing Price, (iii) subject to redemption at a per share price of
$0.01
if the volume weighted average price of Parent Stock equals or exceeds $11.50
per share for any 20 trading days within any 30 trading day period, (iv)
providing for registration rights, substantially similar to those provided
for
in the Registration Rights Agreement, and (v) containing other customary
terms
and conditions reasonably satisfactory to Parent, or (b) as may be reasonably
acceptable to Parent, in either case (a) or (b), as evidenced by a warrant
agreement in form and substance reasonably satisfactory to Parent.
Schedule
II
-11
“Securities
Act”
means
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereby.
“S-4"
means
the Registration Statement of Form S-4 registering the issuance of Parent
Common
Stock, Parent Options, Parent Warrants, Parent Secured Warrants and Parent
Bridge Notes to be issued to Company Holders in connection with the Merger.
“Taxes”
means
(a) all taxes and governmental impositions of any kind in the nature of (or
similar to) taxes, payable to any federal, state, local or foreign taxing
authority or other Governmental Authority, including, but not limited to,
those
on or measured by or referred to as gross income, net income, franchise,
profits, gross receipts, capital, ad valorem, customs, duties, alternative
or
add-on minimum taxes, estimated, environmental, disability, registration,
value
added, sales, use, service, real or personal property, capital stock, license,
payroll, withholding, employment, social security, workers’ compensation,
unemployment compensation, utility, severance, production, excise, stamp,
occupation, premiums, windfall profits, transfer and gains taxes, and interest,
penalties and additions to tax imposed with respect thereto, together with
any
additions to tax or additional amounts with respect thereto, (b) any liability
for payment of amounts described in clause (a) whether as a result of transferee
liability, of being a member of an affiliated, consolidated, combined or
unitary
group for any period, or otherwise through operation of law, and (c) any
liability for the payment of amounts described in clauses (a) or (b) as a
result
of any tax sharing, tax indemnity or tax allocation agreement or any other
express or implied agreement to indemnify any other Person.
“Tax
Returns”
means
any and all returns, declarations, reports, claims for refunds and information
returns or statements relating to Taxes, including all schedules or attachments
thereto and including any amendment thereof, filed or required to be filed
with
the IRS or any other governmental or taxing authority or agency, domestic
or
foreign, including consolidated, combined and unitary tax returns.
“Third
Party”
means
any Person other than Parent, Acquisition Sub or any of their Affiliates.
“Total
Option Shares”
means
all Option Shares in the aggregate.
“Trust
Account”
means
the Trust account established by Parent, initially in an amount of $67,330,000
for the benefit of Parent’s public stockholders, from which Parent may disburse
monies only (a) to its public stockholders in the event of the redemption
of
their shares or the liquidation of Parent, (b) to Parent in an aggregate
amount
of up to $1,600,000 (net of taxes payable) of interest accrued from the Trust
Account for working capital, or (c) to Parent after it consummates an initial
Business Combination.
“WARN
Act”
means
the Worker Adjustment and Retraining Notification Act, as amended.
Schedule
II
-12
“Warrant
Shares”
means,
with respect to a particular Company Warrant or Secured Warrant, the number
of
shares of Company Common Stock subject to such Company Warrant or Secured
Warrant, respectively (including shares of Company Common Stock issuable
upon
conversion of Company Preferred Stock subject to such Company Warrant or
Secured
Warrant) immediately prior to the Effective Time (without regard to vesting,
but
taking into account any adjustments required to be made pursuant to the terms
thereof).
Schedule
II
-13